Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGES FROM THE COUNCIL OF STATE

DOUBLE TAXATION RELIEF

The VICE-CHAMBERLAIN OF THE HOUSEHOLD: The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported to the House That their Addresses of 26 January relating to income tax had been presented to Her Majesty Queen Elizabeth the Queen Mother and Her Royal Highness the Princess Anne; and that Her Majesty Queen Elizabeth the Queen Mother and Her Royal Highness the Princess Anne had been pleased to receive the same very graciously and to give the following answers:

We, Counsellors of State, to whom have been delegated certain Royal Functions as specified in Letters Patent under the Great Seal of the Realm dated 8 February 1979 have received your Addresses praying that the Double Taxation Relief (Shipping and Air Transport Profits) (Venezuela) Order 1978, the Double Taxation Relief (Shipping and Air Transport Profits) (Jordan) Order 1978, and the

Double Taxation Relief (Taxes on Income) (Malawi) Order 1978 be made in the form of the drafts laid before your House.

On behalf of Her Majesty we will comply with your request.

We, Counsellors of State, to whom have been delegated certain Royal Functions as specified in Letters Patent under the Great Seal of the Realm dated 8 February 1979 have received your Addresses praying that on the ratification by the Government of the Grand Duchy of Luxembourg of the Protocol set out in the Schedule to the draft Order entitled the Double Taxation Relief (Taxes on Income) (Luxembourg) Order 1978, and on the ratification by the Government of the Kingdom of Norway of the Protocol set out in the Schedule to the draft Order entitled the Double Taxation Relief (Taxes on Income) (Norway) (No. 2) Order 1978, which drafts were laid before your House, orders may be made in the form of those drafts.

On Her Majesty's behalf we will comply with your request.

DEATH OF A MEMBER

Mr. Speaker: I regret to have to inform the House of the death of the Right Hon. Reginald Maudling, Member for Chipping Barnet, and I desire, on behalf of the House, to express our sense of the loss we have sustained and our sympathy with the relatives of the right hon. Member.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Rhodesia

Mr. Canavan: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a further statement about Rhodesia.

The Minister of State, Foreign and Commonwealth Office (Mr. Edward Rowlands): May I also add my words of grief about the death of Reggie Maudling? His loss will be felt in the affairs of Southern Africa to which he regularly contributed from a long and deep knowledge of the situation. We shall all miss his wise counsels and his contributions to such debates.
My right hon. Friend held discussions on Rhodesia with Mr. Vance in Washington 10 days ago. They agreed that the United Nations supervised elections, following a ceasefire and the establishment of a neutral transitional administration as provided for in the Anglo-American proposals, remain essential for a viable settlement. Tragic recent events make it even more necessary to continue to work to improve the prospects for negotiation through contacts with the parties and with all the Governments concerned.

Mr. Canavan: Although Members on both sides of the House have rightly deplored the killing of 59 people in the recent airliner incident, does my hon. Friend agree that Smith's public promise of retaliation can only escalate the Rhodesian war? Will he remind those Conservatives who are virtually encouraging a rebel like Smith to invade Zambia—a member of the Commonwealth—that such incitements may mean that in the resultant violence some of the blood may be on their hands?

Mr. Rowlands: I appreciate that the extension of the conflict and the response—if there is a response which could lead to further escalation of the violence—is one of the dangerous consequences of the act of barbarism that occurred yester-

day. The right hon. Member for Cambridgeshire (Mr. Pym) said yesterday that acts of provocation, from whichever quarter at this stage, could only make a settlement that much more difficult to achieve.

Mr. Pym: On behalf of my right hon. and hon. Friends, may I add to your words, Mr. Speaker, and say what an immense sense of loss we feel in this House at the death of the Right Hon. Reginald Maudling? We feel that his death constitutes a grievous loss to our country, a very real loss to Parliament, a particular loss to the Conservative Party and, above all, a great loss to his family. I thank the Minister of State for his kind words.
Reginald Maudling was once Secretary of State for the Colonies. I was privileged to be his Parliamentary Private Secretary for a part of that time and he did, indeed, take a deep interest in all colonial affairs. In recent years he has taken part in every debate on Southern Africa. He would certainly have been with us this afternoon had he been spared. He would have taken a very acute interest in the elections that are about to be held.
Has the Minister received an invitation to send observers to that election? If so, what response has he given?

Mr. Rowlands: I do not believe that we have received a formal invitation. We have had announcements that the internal settlement leaders in Salisbury would wish us to send observers. The Government have no plans to do so. We do not think that observers are any substitute for internationally-supervised free and fair elections, but of course it will be for the House to decide how it wishes to respond.

Mr. Steel: May I, on behalf of my colleagues, say how much we, too, miss both the wisdom and friendliness of Reggie Maudling in this House?
Following the report made by the right hon. Member for Anglesey (Mr. Hughes), although no all-party conference will take place, will the Minister assure us that the Government are maintaining contact with the internal settlement leaders and those outside the country in a continuing effort to secure a settlement?

Mr. Rowlands: We shall endeavour to do so. Following the meeting between


my right hon. Friend the Foreign Secretary and Secretary of State Vance in Washington on 3 February, further approaches will be made to the parties in an effort to get agreement on such essential elements as the United Nations supervised elections and ceasefire. Such approaches are, by their very nature, undramatic and confidential, but we certainly shall pursue them.

Mr. Robert Hughes: What is democratic about consulting only whites about the kind of constitution in Rhodesia and the black population of Rhodesia simply has to accept what is laid down by the internal settlement? Until the people of Rhodesia are given a proper opportunity to decide freely for themselves their own future there will be no peace in Rhodesia.

Mr. Rowlands: I agree with my hon. Friend. Certainly the referendum cannot be a test of acceptability of any proposal. There must be a test of opinion of the whole of Rhodesia in conditions which allow free and fair elections to take place.

Mr. Blaker: Does the Minister agree that the elections are designed to test whether the fifth principle has been observed? Does he realise that if the Government refuse to send observers they will appear once again to be discrediting the men of peace and favouring the men of violence?

Mr. Rowlands: That is not so. We have pointed out, rightly, that in the situation in Rhodesia at present, where 90 per cent. of the country is under martial law, where radio and the media are censored and where all parties are not allowed to participate in the internationally supervised elections, we do not believe that this is a basis for testing public opinion or acceptability in Rhodesia.

Several Hon. Members: rose—

Mr. Speaker: Order. We must move on. This matter comes up again.

Indonesia

Mr. Newens: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on British relations with Indonesia.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Evan Luard): Relations with Indonesia

remain good. The Indonesian Foreign Minister, Professor Mochtar, paid a successful visit to the United Kingdom as a guest of the Government, in November 1978. We attach much importance to our relationship with the Association of South East Asian Nations, of which Indonesia is an influential member.

Mr. Newens: How does my hon. Friend justify the sale of another eight Hawk ground attack aircraft to a country with such an appalling record on human rights? Do the Government approve of the annexation of East Timor by force, in which—even according to Mr. Adam Marley—60,000 members of the population of that country were killed?

Mr. Luard: We have not sold ground attack aircraft to Indonesia. The question under discussion has been the sale of Hawk aircraft which are suitable only for training. On the question of East Timor, I agree on the general importance of the principle of self-determination. We voted in the Security Council two or three years ago in favour of the application of that principle to East Timor.

Mr. Nicholas Winterton: Does the Under-Secretary accept that Indonesia is a vital link in the defence of South-East Asia against further Communist advance? Does he also accept that there is tremendous trade potential for the United Kingdom in Indonesia? Will he on all occasions extend every courtesy to the Indonesians so that trade with that country, which is friendly to the West, can continue to increase?

Mr. Luard: It would be an insult to Indonesia to regard that country simply as a bulwark against Communism in that area. Indonesia is an important country in its own right and one with which we have very good relations.

Cyprus

Mr. Christopher Price: asked the Secretary of State for Foreign and Commonwealth Affairs what recent action he has taken to support Dr. Waldheim's initiative for a solution in Cyprus.

The Minister of State, Foreign and Commonwealth Office (Mr. Frank Judd): The Government are keeping in close touch with Dr. Waldheim, the Cyprus


parties, and other interested Governments, about progress towards a resumption of intercommunal negotiations. We have made clear our full support for Dr. Waldheim's efforts.

Mr. Price: Is my hon. Friend aware that the Greek Cypriots side has accepted without any reservations at all Dr. Waldheim's agenda, whereas the Turkish Cypriots have submitted reservations which have so far prevented the resumption of these talks? In these circumstances, does he really think it sensible for Britain to participate in the massive economic aid towards Turkey, because the Prime Minister said on his return from Guadeloupe that although there was no formal linkage he very much hoped that the Cyprus negotiations and the aid to Turkey would go hand in hand?

Mr. Judd: The United Kingdom Government, together with the Governments of the United States and Canada, have been closely following the prospects for restarting the negotiations. We are determined to do all that we can to assist in this matter and we have our own proposals available as a basis for detail in this respect. We must persevere in trying to get the parties together. I hope my hon. Friend will feel that the preservation of democracy in Turkey stands on its own merits as an issue worth our support.

Mr. James Lamond: Has my hon. Friend noticed the gross violation of human rights in Cyprus, both in the South and more clearly in the North? Does he realise that his and his right hon. Friends' stand on human rights—the speeches that they make and the books that they write—loses a little credibility when they stand idly aside and disregard the violations in Cyprus?

Mr. Judd: If that were true it would be a serious allegation. It is not true. We have done all that we can to support international efforts to resolve the humanitarian problems. We are now convinced that the best way of doing this will be in the context of a general settlement. In the meantime, we are sorry that the parties themselves have not yet been able to reach practical arrangements for investigating the breaches of human rights which concern us all.

Mrs. Knight: Does the Minister recognise that there still exist the gravest and greatest difficulties for persons who have come over here as political refugees from Cyprus and who are expected to return now? Will he please think again about directing some of them to return home, as he has some of my constituents, who really could not possibly safely return at this time?

Mr. Judd: I am sure the hon. Lady will agree with what I said a moment ago. If people are to have the prospect of real security and peace in their homes in Cyprus, it underlines the urgency of achieving a general political settlement and the importance of us all doing all that we can to persuade the parties to come together and start working on Dr. Waldheim's proposals, supported by the more detailed ideas put forward by ourselves, the Americans and the Canadians.

Zambia (British Nationals)

5. Mr. Bulmer: asked the Secretary of State for Foreign and Commonwealth Affairs what progress he has made in obtaining the consent of the Zambian Government to the repatriation by British nationals of such bank balances as they may hold in that country.

Mr. Rowlands: My right hon. Friend is satisfied that the Zambian Government are doing their best to speed up the grant of permission in these cases. But they are handicapped by the continuing scarcity of available foreign exchange. They are fully aware of the Government's concern about this matter.

Mr. Bulmer: Will the Minister confirm that a significant number of Britons have been recruited by the Zambian High Commission without it being made clear to them that they would not be able to bring home their savings? Will he see that any Britons thinking of going out there do not labour under any such illusion in future? Will he also recognise that Britons returning to this country, some in straitened circumstances, find it difficult to accept that they, as taxpayers, should be giving money to Zambia when their savings cannot be repatriated? Will he discuss the problem with his right hon. Friend the Minister of State for Overseas Development?

Mr. Rowlands: I cannot confirm the first part of the hon. Gentleman's question, but I shall make inquiries about it. I accept that it is important that people should realise the foreign exchange problems besetting Zambia and the problems of remitting money home. I also appreciate the hardships, because I deal with a large number of letters from hon. Members on behalf of their constituents. I also appreciate why people do not understand the support that we are giving, but if it were not for that support the situation would be that much worse. One aspect of the £20 million copper purchase arrangement that we had with Zambia was that the Zambians agreed to use part of that money to reduce the backlog of British individual's funds.

Mr. Brooke: I recognise the difficulties of Zambia, but will the Minister convey to the Zambian Government that the chances of further investment in that country will be greatly enhanced by a resolution of the present problems?

Mr. Rowlands: I am sure that the Zambian Government fully appreciate that point. We shall press them again to see whether anything can be done to relieve the hardship caused by the delays and the consequential bad impression that they give.

Mr. Luce: Since thousands of British subjects and many British companies have their funds frozen in Zambia, and since the British Government have, through the provision of aid and assistance with the IMF loans to Zambia, facilitated the provision of foreign exchange to that country, does the Minister agree that there sould be a clear understanding with the Zambian Government that they should give the highest priority to the repatriation of those funds?

Mr. Rowlands: The Zambian authorities understand the genuine problems of hardship that have arisen as a result of the failure to allow remittances and the consequences for individuals and the impression created on people who would like to work in Zambia. As part of the recent £20 million copper agreement, we have reached agreement with the Zambian authorities that they will use part of that money to reduce the backlog of British individuals' funds.

China

Mr. Macfarquhar: asked the Secretary of State for Foreign and Commonwealth Affairs if he will visit China.

Mr. Luard: My right hon. Friend is hoping to visit China before long, but dates have not yet been fixed.

Mr. MacFarquhar: Is my hon. Friend aware that when the Foreign Secretary goes to China he will find a country which is eagerly studying the English language and that I hope that we shall increasingly help the Chinese in that task? However, is he also aware that the study of Chinese in England is under grave threat, partly because of Government inaction? Is he aware that the Chinese language training facility at Cambridge University, where our foreign service officers receive their first year of training, is under economic pressure? Will my hon. Friend undertake to consult his colleagues at the Ministry of Defence, the Department of Education and Science and the Department of Trade to make sure that the facility does not disappear because of lack of Government support?

Mr. Luard: Since my hon. Friend and I are perhaps the only two Members who have been students of Chinese, I share his concern. I was not fully aware of all the facts that he has given and I shall look into them. The Government are concerned to promote cultural relations with China and we have reached agreement in principle for a major exchange of students. We hope to receive about 1,000 Chinese students and are urgently pursuing discussions with the Chinese to enable that programme to take place.

Sir Anthony Royle: Will the Secretary of State raise with the Chinese the question of the Harrier deal? Is the Minister aware that there is some concern that certain elements in the Government in London are dragging their feet and that the behaviour of the Secretary of State for Energy yesterday has caused many raised eyebrows, not only in the United Kingdom, but in China?

Mr. Luard: There is only one policy on this queston, and it is that of the Government as a whole. That policy was announced by the Prime Minister in the House last month. He said that we were


ready in principle to undertake a sale of Harriers to China. Negotiations are taking place on the details of that agreement and some will be announced in due course.

Mr. Fernyhough: Since China is still a Communist country, and since from 1949 the whole Tory Party would have bombed it to hell—and two-thirds of Labour Members would have done likewise—can my hon. Friend explain what has been the fundamental change that enables us to embrace those so-called wicked enemies of yesterday and to make friends with them today? Can he give a guarantee that, though today we are making changes in our approaches to China because of its so-called anti-Sovietism, we shall not change our attitude towards China if it once more becomes friends with the Soviet Union?

Mr. Luard: I agree with my right hon. Friend that the change in the attitude of some Conservative Members in a very short space of time is rather remarkable. The Government have always wanted to pursue a friendly policy towards China.

Mr. James Lamond: And to sell arms.

Mr. Luard: It is only recently that there has been any discussion about the sale of arms. We have made clear that we are interested only in the sale of defensive arms. Since China has expressed interest in the matter, we have decided that we are perfectly justified in selling defensive arms and we do not believe that that need have any effect on our relations with other countries, to which we continue to attach great importance.

Mr. Hurd: How can the Government have a credible policy towards China if the Secretary of State for Energy is allowed to contradict, in almost every newspaper today, the Government's declared policy on the sale of Harriers? Does the Minister agree that if Mr. Attlee had still been Prime Minister the resignation of the Secretary of State for Energy would have been obtained by lunchtime today?

Mr. Luard: I understand that the hon. Gentleman is referring to a private meeting which took place yesterday and what was said there. I cannot take respon-

sibility for press reports which are obviously based on conjecture of what may have happened at that meeting.

Several Hon. Members: rose—

Mr. Speaker: Order. If Mr. Attlee were still Prime Minister, Mr. Speaker Clifton Brown would not have allowed the question of the hon. Member for Mid-Oxon (Mr. Hurd).

Persian Gulf

Mr. Temple-Morris: asked the Secretary of State for Foreign and Commonwealth Affairs if he has plans to visit the Sultanate of Oman or any other part of the Persian Gulf.

Mr. Judd: Yes, Sir. My right hon. Friend is attending on Her Majesty the Queen while she visits Kuwait, Bahrain and Saudi Arabia. I will visit Qatar, the United Arab Emirates and Oman, also in attendance on the Queen next week.

Mr. Temple-Morris: Can the hon. Gentleman assure the House that while the Foreign Secretary is in those parts he will make every possible effort to rectify the serious lack of confidence in the West and its capacity to act in the defence of that area? Does he agree that we shall not get far towards that end unless there is an effective military alliance to cover that part of the world?

Mr. Judd: I think the hon. Gentleman will agree, on reflection, that the lesson of recent history is that real security and stability must rest on arrangements that make political sense in the context of the countries concerned. My right hon. Friend and I will, of course, be discussing with Ministers in the Gulf the mutual problems in that area. Obviously, the need for stability in the Gulf is of profound importance for us.

Mr. Watkinson: Is my hon. Friend aware that we welcome the recognition which the Government have extended to the new regime in Iran? Can he tell the House whether his right hon. Friend will have any contact with that new regime? Ought not we at least to congratulate the new regime on ridding itself of one of the most repellent secret police forces in the world? Has any estimate been made yet of the degree of shortfall in oil supplies coming from the


Gulf area as a result of what has taken place?

Mr. Judd: Evaluations of oil supplies are being made as of now about the implications of what has happened. Of course, there will be serious consequences for world supplies. That cannot be denied. As for the general position on relationships, I am glad to tell the House that our ambassador already is establishing good working relationships with the new Government in Iran.

Mr. Maurice Macmillan: Will the hon. Gentleman and his right hon. Friend the Foreign and Commonwealth Secretary, as a result of their discussions in the Gulf countries, undertake to open discussions with the United States Government to see what action may be required by the NATO Alliance to provide greater stability in an area of the world where recent events, especially those in Iran, have gone a very long way towards destabilisation?

Mr. Judd: I do not think that we see NATO as fulfilling, as NATO, a function in the Gulf. However, we believe that because of the inescapability of international interdependence in these matters we must all face the need to support those with responsibility locally for stability in the Gulf in any way that makes sense.

Mr. Newens: Do not recent events in Iran demonstrate that autocracy and dictatorship have no future in the area against the demands of the people for democracy and elementary rights? In the circumstances, should not we make it clear to the Sultan of Oman that, unless he is prepared to introduce democracy into his country, in the long run his regime can no more survive than did that of the Shah?

Mr. Judd: What everyone in the House will recognise is that recent events have made it clear that, in any part of the world, eventually the Government depend upon consent—[HON. MEMBERS: "Hear hear!"] As my right hon. Friend the Prime Minister is making plain constantly in the context of domestic issues, that applies in this country as well. I understand that in recent months my hon. Friend, with his own special interest in these matters, has been one of the most prominent hon. Members of the House

arguing that we should not interfere in the internal politics of other countries and that we must leave it to the people of these countries to find their way forward.

Mr. Pym: In view of the implications for all the countries surrounding the Persian Gulf of recent events in Iran, and in view of British interests in the whole area, will the Minister consult his right hon. Friend the Foreign and Commonwealth Secretary when he returns at the weekend and undertake to make a full statement to the House next week about the events in Iran, especially the effect of those events upon trade with Britain, oil supplies, defence contracts and banking?

Mr. Judd: I assure the right hon. Gentleman that we have every intention of keeping the House fully informed of the implications of what has happened for Britain and, indeed, for our other friends and allies.

USSR

Mr. Michael Spicer: asked the Secretary of State for Foreign and Commonwealth Affairs when he plans to meet representatives of the Soviet Government.

Mr. Luard: My right hon. Friend has at present no plans to do so.

Mr. Spicer: Can the hon. Gentleman assure the House that, when the Foreign Secretary meets his opposite number in the Soviet Union, he will make it clear that this country, together with its allies, will stand firm against any attempt by the Soviet Union to exploit the new circumstances in Iran, especially as they affect Western supplies of oil?

Mr. Luard: I am glad to say that there is no evidence so far that recent events in Iran have been primarily the result of any action by the Soviet Union. Hon. Members will have read the firm statement in this regard made by the United States Secretary of State, and I am sure that the Soviet Union is aware that we would take a similarly adverse view of any attempt to exploit the present situation in Iran.

Mr. Flannery: Despite the vertical take-off of the entire Tory Party in the general direction of China, when my right


hon. Friend the Foreign and Commonwealth Secretary eventually goes to the Soviet Union, will he try to explore the fact that a new leadership now exists in China and that it is in our general interests to see peace between those two great countries to help the whole world? Will he try to discover whether there is any tendency in those two Governments to move towards a rapprochement of the kind that they had in the past?

Mr. Luard: I agree that this country and the West generally have no interest whatever in trying to stimulate bad relations between the Soviet Union and China. I said earlier what many members of the Government have said, that we do not believe there is anything in our present good and improved relations with China which need in any way be regarded by the Soviet Union as a threat.

Vienna

Mr. Watkinson: asked the Secretary of State for Foreign and Commonwealth Affairs if he plans to seek to visit Vienna.

Mr. Judd: My right hon. Friend has at present no plans to do so.

Mr. Watkinson: Will my hon. Friend pass on to his right hon. Friend the Foreign and Commonwealth Secretary the message that he should continue to press for the mutual and balanced force reduction talks to be raised to Foreign Minister level so that we can make some move in this log-jam which has been going on now for five years, the release of which is so vital to security in the central region of Europe?

Mr. Judd: I agree with my hon. Friend, as I know my right hon. Friend does, that what is most important in arms control matters is to ensure that the detailed technical discussions take place within the framework of real political will to make progress. In this context, we are committed to a meeting at Foreign Minister level when circumstances indicate that serious progress can be made. We do not believe that we have yet reached that stage.

Mr. Forman: Will the Minister also take the opportunity of an early visit to Vienna to see the people at the International Atomic Energy Agency there and to assure them of Her Majesty's Government's

determination to provide more funds and personnel to backup that agency's work on the safeguards side of nuclear proliferation, especially bearing in mind the recent threat suggested by developments in Argentina, for example?

Mr. Judd: I can think of no more challenging issue for the international community than effective international action in this sphere. I assure the hon. Member that we want to do anything that we can do in the years ahead to make the work of that agency increasingly effective beyond what it is doing already.

Hong Kong (Refugees)

Mr. Ashley: asked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking and persuading other Governments to take to help with the resettlement of temporary refugees now in Hong Kong.

Mr. Luard: As my right hon. Friend the Home Secretary informed my hon. Friend the Member for Southampton, Test (Mr. Gould) on 17 January, of the further 1,500 Vietnamese refugees to be admitted to Britain, 1,000 will come from Hong Kong. We have also approached 18 other Governments requesting them urgently to accept Vietnamese refugees from Hong Kong.

Mr. Ashley: Despite those approaches, is it not the case that many countries have refused to accept a fair quota of refugees from Indo-China and that they are as a result imposing an excessive burden on the Hong Kong authorities? Is it not now time for a new initiative by the British Government, through the United Nations Commission or the Commonwealth, to try to persuade more countries in Western Europe and North America to accept more refugees at a faster rate?

Mr. Luard: There is no doubt that the burden of accepting these refugees has been distributed very badly. It has been borne mainly by a few countries, especially Thailand, Malaysia, Hong Kong and one or two other territories. That is why, as I explained to my hon. Friend in my original reply, the British Government have made an urgent approach to a large number of other countries, asking them to make a better offer of places for these refugees.

Sir Anthony Royle: Is the Minister aware that his answer is very unsatisfactory? It is rumoured that there are up to 100,000 or more Vietnamese of Chinese extraction who wish to leave Vietnam and who may be making their way to Hong Kong. What action is the Minister taking to help the Hong Kong authorities deal with this influx if these people arrive on their doorstep?

Mr. Luard: I am sorry to say that the hon. Gentlemen's estimate may be a great underestimate of the total number who might wish to leave eventually. The total number of people of Chinese origin in Vietnam is about 1 million or more. I hope very much that most of them will not wish to leave Vietnam. I also hope that the policies of the Vietnamese Government which have encouraged that flow will cease forthwith. We have made maximum efforts to secure offers of places from other Governments and are giving every assistance to the Government of Hong Kong in dealing with the numbers already there.

Oral Answers to Questions — EUROPEAN COMMUNITY

Council of Ministers

Mr. Loyden: asked the Secretary of State for Foreign and Commonwealth Affairs when he expects to meet Foreign Ministers of the EEC.

Mr. Hicks: asked the Secretary of State for Foreign and Commonwealth Affairs when he hopes next to attend a meeting of the EEC Council of Ministers.

Mr. Cryer: asked the Secretary of State for Foreign and Commonwealth Affairs when he expects to meet EEC Ministers.

Mr. Skinner: asked the Secretary of State for Foreign and Commonwealth Affairs when he expects to meet EEC Ministers.

Mr. Roy Hughes: asked the Secretary of State for Foreign and Commonwealth Affairs when he next expects to meet EEC Foreign Ministers; and if he will make a statement.

Mr. Judd: My right hon. Friend expects to meet his EEC colleagues next at

the Foreign Affairs Council in Brussels on 6 Mareh.

Mr. Loyden: Will my hon. Friend advise his right hon. Friend that the House is very concerned about the balance of detente, particularly the relationships of the United Kingdom and other European countries with the Soviet Union? Will he give an assurance that this country will continue to strive for detente to restore the balance that may have been affected by the recent visit of the Chinese Vice Premier to the United States?

Mr. Judd: I assure my hon. Friend that, within the context of political cooperation, members of the Nine take very seriously co-ordination of their approach to CSCE talks. We are already looking keenly at what will come on to the agenda at the next formal round in Madrid. We believe that the success of those talks will depend on the effectiveness of the preparatory work before that formal meeting takes place.

Several Hon. Members: rose—

Mr. Speaker: I shall call first those hon. Members whose questions are being answered.

Mr. Hicks: Will the Minister confirm that he intends to raise again with his EEC counterparts the vexed question of the renegotiation of the EEC common fisheries policy? Will he confirm to the House that there will be no sell-out of essential inshore fishing interests as part of a wider EEC package deal?

Mr. Judd: The next discussion will be at the Fisheries Council due to take place on 19 February. I assure the hon. Gentleman, and, indeed, the whole House, that there is no question of a sell-out on this issue. Equally, we are convinced that it is possible to find an effective common policy which preserves and protects the undeniable rights and interests of the British fishing community, always remembering that 60 per cent. of the common fish stock will come from British waters.

Mr. Cryer: Does my hon. Friend accept that our membership of the Common Market so far has been an unmitigated disaster? When he meets the Ministers on 6 March, will he make plain to them that we ought to be able to remedy the


£2·5 billion deficit with other EEC countries by imposing import controls against other EEC members, unilaterally if necessary? Will he give an assurance that he will come to the House with an amendment to the European Communities Act to enable this Parliament and the Labour Government to decide whether EEC rules and directives apply in this country and so assist in restoring to this Parliament and a Labour Government the power of making economic decisions in this country?

Mr. Judd: As my right hon. Friend the Prime Minister has made clear, we see the way ahead in the context of membership of the Community within our obligations, as they stand, under the treaties. We believe that a great deal can be done to mobilise common sense and rationality in overcoming the undoubted faults and failures that exist in the life of the Community.
On the specific question about trade, my hon. Friend is well informed and has had recent experience. I ask him to remember that our overall trade performance with those countries that are now members of the Community was not as impressive as we would have liked before accession. There is no great evidence that it has deteriorated as a result of membership. In fact, the export to import ratio has marginally improved.

Mr. Skinner: Has the Minister noticed that in the last few weeks a number of Tory MPs have been making remarks about the Common Market that are not altogether complimentary? One is forced to the conclusion that, as we get nearer to direct elections, they are orchestrating an argument, which they hope the electorate will accept, in terms of being slightly less pro-European than they were at the time of Britain's entry. Will he tell the Common Market leaders that he fully supports the NEC direct elections manifesto which says that if there are no fundamental reforms in that Assembly we shall seriously consider—

Mr. Speaker: Order. The question is getting very long. The hon. Gentleman is giving information instead of seeking it.

Mr. Skinner: The Common Market has been a long argument, and it is one that will go on for a long time—

Mr. Speaker: Order. I have no doubt that the hon. Gentleman is right, but he must still ask the question as briefly as he can.

Mr. Skinner: Will the Minister tell the Common Market leaders that there is a lot of resentment over Britain having to pay £20 for every man, woman and child in this country towards the Community budget while low-paid workers in hospitals and local government are finding it difficult to get off the poverty line?

Mr. Judd: On the issue of contributions to the Community, we believe that there is a need for a thorough overhaul of the basis on which these are calculated. We believe that as the second highest net contributor to the common budget we are being asked for more than our fair share. While we are in this predicament, we have every right to speak out strongly on the reforms that we believe necessary. Of the reforms needed in the financial area, the highest priority is reform of the common agricultural policy.
I have a certain sympathy with my hon. Friend over the forthcoming direct elections campaign. Listening to the speeches of some of those who may be involved, it sounds as if it may be rather a coy dance when it takes place. We have to get across clearly to the country, in advance of those elections, that the future of the Community, as we see it, will be based upon the accountability of the Council of Ministers to this House and Houses like this throughout Community member countries.

Mr. Walters: Does the Minister agree that progress towards peace in the Middle East is very slow? It is beginning to become apparent that the Camp David triumph was not quite the triumph that it seemed. Will he discuss with his European colleagues whether the time is not approaching when Europe should take some initiative, bearing in mind the disastrous consequences to Western Europe if peace is not established?

Mr. Judd: The hon. Gentleman will recall that during our presidency of the Community we were able to define the common position of the Nine towards the Middle East. We must keep this issue constantly under review. The way forward is to build on the developments


that have been achieved and envisaged in the Camp David context, recognising that these have to be seen as part of an approach to an overall comprehensive settlement.

Mr. David Steel: When the Secretary of State next meets the EEC Ministers, will he be able to give them an unqualified assurance that the Government party in this country will be conducting the direct elections on the basis of contributing to the continuing political and economic development of the Community?

Mr. Judd: I very much hope that everybody involved in these elections will be looking for ways in which we can mobilise the people of the Community to establish the right priorities in the interests of ordinary men, women and children of the Community and not just remote technicalities, and to make this a live human campaign about issues relevant to ordinary people.

Mr. Grocott: Does my hon. Friend agree that it is pointless making robust statements about the threat to British interests under the OFP, the CAP and contributions to the Community budget because these statements will be treated with derision by other member States unless he makes plain what he intends to do if our legitimate requests are not met?

Mr. Judd: With great respect to my hon. Friend, we have first to demonstrate some self-confidence as a nation that we can mobilise support in the Community behind our priorities. We are already making progress. I find it extraordinary that hon. Gentlemen on both sides of the House sometimes fail to recognise the considerable progress made by my right hon. Friend the Minister of Agriculture, Fisheries and Food in stemming this incredible—and endless, as it appeared over the years—rise in food prices, which will only serve to build up wickedly wasteful surpluses in nobody's interest. We are making progress. Let us mobilise support behind that progress.

Mr. Amery: Will the Minister or his right hon. Friend draw the attention of his colleagues in the European Community to the declarations by leaders of the Iranian Government, just recognised by us, that they intend to withdraw from CENTO, to restructure the oil industry and to cancel a number of contracts con-

cluded with European countries, and to the fact that all those matters have far-reaching implications for Western Europe, and indeed for the West as a whole? Will he further draw their attention to the sacking of the American Embassy in Iran and the murder of the American ambassador in Afghanistan and make it plain that these developments constitute a potential threat to peace in the central Asian area? Will he, before these discussions take place, take the opportunity, as my right hon. Friend the Member for Cambridgeshire (Mr. Pym) has suggested, of taking the opinion of the House on these matters?

Mr. Judd: I am sure that the right hon. Gentleman will be relieved to know that already this week, on Monday, there were Community discussions evaluating the consequences for individual members of the Community and the Community as a whole of what has happened. The common objective of the Community is to work together with the people of Iran for a stable future for that country, which will be in the interests not only of the people of Iran but of the international community as a whole.

Mr. George Rodgers: Does my hon. Friend agree that major reforms of the Common Market will not be achieved without the consent of all members, and that, since members' interests are in conflict, it is obviously impossible to achieve it by persuasion alone? Is it not the case that the only weapon we have is to demonstrate that in that circumstance we are prepared to withdraw?

Mr. Judd: If we constantly parade the threat of withdrawal from the Community that undermines our influence within the Community, because those who are then expected to listen to our arguments do not listen to them on their merits. They listen to the argument of someone who is saying "Either we get our way or we withdraw." I believe that there is much evidence that if we use the power of rational persuasion and argument we can mobilise support behind our priorities.

Mr. Hurd: Returning to the Minister's earlier answer about our contribution to the budget, will he confirm that the main reason why our contribution to the EEC budget has soared when expressed in pounds, as the hon. Member for Bolsover


(Mr. Skinner) expressed it, is that the Government have allowed the pound to sink by 30 or 40 per cent. compared with the main European currencies?

Mr. Judd: I think that the hon. Member is misleading the House. Of course inflation and devaluation have an impact, but the fact remains that we are the second largest net contributor to that budget. That is an unfair burden on the British people.

Mr. Cryer: In view of the unsatisfactory nature of that reply, I reserve the right to raise the matter on the Adjournment—and I am a Member who has been here.

Enlargement

Mrs. Renée Short: asked the Secretary of State for Foreign and Commonwealth Affairs what effect he expects the projected enlargement of the EEC to have on the position of the United Kingdom within the Community.

Mr. Judd: Although there will be economic costs, we expect that enlargement will in the long run strengthen the Community and its member States, including the United Kingdom.

Mrs. Short: But is my hon. Friend aware that he is completely misreading the strength of feeling in the House and the country about the economic burdens that we are already facing because we are in the Common Market? Is he aware that the Germans receive £11 per head from the Common Market funds and that Denmark receives £107 per head? Does he not consider that the renegotiation of our membership terms should be carried out before the mediaeval agricultural countries of Greece, Spain and Portugal are accepted into the Common Market? It will be too late afterwards.

Mr. Judd: My right hon. Friend the Minister of Agriculture has made it plain that we shall stand resolutely against any further price increases which would lead to still more wasteful surpluses this year. He is making that stand, of course, in the centre of the most expensive element of the common budget—the one that leads to this heavy burden on the British people. I hope that we can have the united support of the House for what he is trying to do.

Mr. Welsh: What consultations has the Minister had with the Minister of Agriculture about Greece's entry into the Common Market? Is he aware of the importance of agriculture to the Greek economy and the increased competition that this will create for limited EEC agricultural funds?

Mr. Judd: Of course we are aware of the importance of agriculture for Greece. I am sure that hon. Members will have taken account of the fact that, if we want cheaper supplies of some of our foodstuffs, some of the new candidate countries may be able to provide them.

Mr. Arnold: asked the Secretary of State for Foreign and Commonwealth Affairs what further progress has been made towards enlargement of the EEC; and if he will make a statement.

Mr. Judd: Negotiations with Spain were formally opened on 5 February. On other aspects of enlargement, I have nothing to add to the reply I gave to the hon. Member on 17 January.

Mr. Arnold: But what specific obstacles does the Minister now see standing in the way of the successful completion of these negotiations? Can he say more about the kind of changes he would like to see in the common agricultural policy in order to assist the process of enlargement?

Mr. Judd: Britain has been in the vanguard of those arguing for Spanish accession. As for reform of the CAP, which we do not see tied to the issue of enlargement, our priorities are to eliminate costly surpluses and the financial burden that they place on the British people, to get fairer access for reasonable competitive foodstuffs from third countries and to ensure, as I have repeatedly told the House and as my right hon. Friend is already achieving, a fairer deal for the consumer as weighed against the interests of the producer in the life of the Community.

Mr. Madden: Is damage to the British textile industry one of the economic factors that the Minister expects to flow from any enlargement of the Common Market?

Mr. Judd: We have to take very seriously the complications presented by enlargement for the textile industry


throughout the Community. That will be high on the agenda in the negotiations.

Defence of Europe

Mr. Frank Allaun: asked the Secretary of State for Foreign and Commonwealth Affairs if he will resist proposals for the EEC to develop a military arm.

Mr. Judd: No such proposals are under consideration in the Community or among the Nine. Nor would we favour them if they were. For the foreseeable future the defence of Europe will remain a matter for NATO.

Mr. Allaun: Will the Minister refuse to make the Common Market an economic base for a military anti-Soviet pact, which the Bow Group is now pressing for, and which some of us warned against years ago? Instead, will he help to end the division between the EEC and COMECON?

Mr. Judd: I am sure that my hon. Friend knows of the discussions and negotiations on the relationships between the EEC and COMECON which have been under way now for some time. As for defence, I repeat that the Government believe that the Atlantic dimension is absolutely indispensable to the defence and security of this country. We therefore put all our approach to defence squarely on the principle of membership of NATO.

Mr. Warren: Will the Minister use the forum of the Council of Ministers to encourage France to rejoin NATO as a full member?

Mr. Judd: I am sure that the hon. Gentleman is referring to the Nine, as distinct from the Community. We do not see the forum of political co-operation in

the Nine as the right place to advance this matter, because there are members of the Nine who are not members of NATO. But as friends and allies on a bilateral basis, this is a subject that we shall always keep under review.

Mr. William Hamilton: Is it not the case that the Nine are seeking to establish and improve relationships with China? Can my hon. Friend confirm that, in the Council of Ministers, the Nine agree with the concept of the British sale of Harriers to China?

Mr. Judd: We have already dealt this afternoon with the subject of that sale. I am glad to say that the Community is putting a great deal of work into economic relations with China.

Mr. Eldon Griffiths: Since the defence of Europe cannot be separated from the defence of areas that are vital to Europe, will the Minister, with his colleagues in the Community, address himself to the consequences of the collapse of CENTO? Will he take the opportunity of his visit next week to the Gulf personally to visit the Ayatollah Khomeini in Iran and discuss with him the future position of Iran within CENTO, which I understand would be welcome to the present authorities in Iran?

Mr. Judd: We are straying a long way from the life of the Community, but I shall not be able to visit the Ayatollah Khomeini during my time in the Gulf next week. I am sorry to disappoint the hon. Gentleman on that score. However, we recognise the implications for us of what has happened in Iran. That is why we had the meeting to which I have referred, on Monday this week, to discuss the implications. We shall keep the matter under active and constant review.

PORTLAND (FLOODING)

Mr. Evelyn King: Mr. Evelyn King(by private notice) asked the Minister of Agriculture, Fisheries and Food if, in the light of the Portland flood disaster and the damage sustained by residents on the nights of 13 December and 13 February, he will indicate the action likely to be taken to prevent further loss, either of life or property, and the size and nature of the compensation to be provided.

The Minister of Agriculture, Fisheries and Food (Mr. John Silkin): I should like to begin by expressing my sympathy for the residents in Portland who suffered such a terrible experience on 13 February. We are still collecting information about the cause of the very severe flooding, but it looks as though the wave action that caused the damage was of freak proportions. Subsequent reports from the Meteorological Office suggest that waves of 20 to 25 ft had built up in the Channel as a result of a storm swell in mid-Atlantic. By the time that these waves reached Portland they had increased to 40 or 50 ft, but local weather conditions gave no warning that such an onslaught was imminent.
All our efforts are at present concentrated on dealing with the problems on the spot, and it is too early yet to make a full assessment of the position. However, it is clear that no sea defences could possibly keep out freak waves of 40 to 50 ft. Even if the sea defence improvement scheme which the Wessex water authority at present has in hand had been completed, it would not have protected Portland against these conditions. Nevertheless, I have instructed my engineers to discuss straight away with the water authority what further measures now need to be taken to strengthen the sea defences and how the warning arrangements can be improved. I have told them to offer all their specialist advice to the authority and to indicate that we shall be prepared to consider sympathetically such requests for additional funds as the authority may make.
The question of compensation is a matter for my right hon. Friend the Secretary of State for the Environment. I am glad to see my hon. Friend the Under-Secretary of State for the Environment on

the Front Bench. He was the previous hon. Member for Dorset, South.
Briefly, the position is that the district council has powers, under section 138 of the Local Government Act 1972, to incur expenditure on assistance to householders and others affected. As on previous occasions, the Government will be prepared to grant aid to the council at the rate of 75 per cent. on any expenditure in excess of the product of a penny rate.

Mr. King: I thank the Minister for the sympathy that he has extended to my constituents. I add my gratitude, and I am sure his, to the Army, the Navy and local and other authorities which are at this moment dealing with the tragedy.
Is the Minister aware that this is the second time that this has happened within two months? Does he realise that this disaster means not only waves 60 ft. high but 70 families displaced? It means a pile-up of motor cars and helicopters. It means that the community is now completely isolated. It has been isolated for some days. Is he aware that this has happened, not always on this scale, twice a year for five years or more? Will the Minister hasten the action that he has indicated the Wessex water authority is prepared to take?
Is the Minister aware that this relatively poor local authority has to find £100,000 before the Department is willing to contribute anything? Does he accept that every other Portlander is a member of the Navy, the prison service or the Civil Service and has served the Government with great loyalty? Is it not now time for the Government to be generous to them?

Mr. Silkin: I tried to make a distinction. I understand that to those who have suffered, that distinction is not all that real, but it is a distinction between the two flood occurrences—the one in December and the one today.
I saw in The Daily Telegraph a report from a local police sergeant, who said, about yesterday's disaster:
Undoubtedly this is the worst attack by the sea in living memory. None of us has known anything like it.
That is not something that the Government or anybody else can do anything about.
What should be done to help? I have said that I have taken immediate measures to ensure that all possible help is given. My Department has given the maximum amount for which we have been asked and which we are allowed to give to assist the water authority. I understand that the work that has been going on might have been lost as a result of the second disaster and that consequently additional funds might be needed. I shall give the maximum, as I have during my term of office on each occasion that I have been asked.
The hon. Member asked about compensation under section 138 of the Local Government Act 1972. That is a matter for my right hon. Friend the Secretary of State for the Environment. Obviously he must be asked, and I have no doubt that the local authority will ask.

Mr. Stephen Ross: May I draw the Minister's attention to the fact that what happened at Portland yesterday happened at Torcross a couple of months ago and on the Isle of Wight last year? We all sympathise with those involved. Is it not time that we set up a national disaster fund to deal with such occurrences?
Is the Minister aware that many local authorities are unable to raise a penny rate to deal with such situations? Is it not time for him to persuade the Chancellor and the Prime Minister that we should have a national disaster fund in order to deal quickly with such tragedies?

Mr. Silkin: The question of a national disaster fund is raised from time to time. It is always difficult to take a particular view when one is dealing with a disaster that has hit people in a locality. On a day such as this, one's mind is full of that. But I do not believe that there is any real justification for setting up a national disaster fund. I believe that we must all play our part in building up the sea defences. The Government are doing that now.

ECONOMIC SITUATION

The Prime Minister (Mr. James Callaghan): With permission, Mr. Speaker, I should like to make a statement.
As the House is aware, the Government have been holding discussions with the general council of the TUC to find a better way of conducting industrial relations and to reach a common approach that will secure our economic objectives. The Government and the general council have today agreed a joint statement which sets out the outcome of these discussions. The statement will be placed in the Vote Office.
The statement reports that the TUC is on its own authority separately issuing guidance to its affiliated unions on the conduct of industrial relations covering three areas—first, negotiating procedures for avoiding disputes; secondly, the conduct of industrial disputes where they arise; and, thirdly, trade union organisation and the closed shop.
Hon. Members will find that the documents issued by the TUC on these matters are appended to the joint statement. They lay down comprehensive standards of trade union responsibility and commend the value of conciliation and arbitration.
They say that strike action should be used only as a last resort; that agreements once entered into should be observed by both union members and management; that when a strike does take place there is a vital necessity to maintain supplies and services essential to the health and safety of the community.
They contain detailed advice on the identification and union control of pickets. The third guide acknowledges that aspects of the closed shop have caused concern and that there is a need for agreements to provide for conscientious objectors and certain other categories of workers.
The Government welcome the publication of this authoritative advice by the general council of the TUC, which its affiliated organisations are asked to accept as a basis for their conduct of industrial relations. General observance of this guidance would make for a substantial improvement in our industrial relations.
The joint statement itself is concerned to find a better way of reaching a consensus on the economic path. We jointly recognise the anxiety about employment prospects, the need for training so that workers will possess the skills to match the new technological developments, the need for greater industrial accountability and democracy and the fundamental importance of increasing productivity.
We agree that industrial regeneration cannot rely on market forces alone and that action is needed by industry, the Government and the trade unions. The document emphasises the need for a close working understanding between the Government and the Trades Union Congress and that the proper handling of this relationship imposes on the TUC the need to accept that its expanding role carries with it wider responsibilities.
We are agreed that the British people must achieve living standards in line with those in the rest of Europe, and that prices can best be kept down by increasing productivity and output and re-equipping our manufacturing industry.
We have agreed on an important objective about the future level of inflation. It is that within three years we must reduce our annual rate of inflation to 5 per cent. or less. We are agreed that the concept of a "going rate" with successive groups escalating the rate by building on the basis of earlier settlements is an obstacle to reducing inflation.
The statement points to advantages that may be secured from the synchronisation of pay bargaining in certain areas, but it recognises the difficulties of introducing this quickly.
We are agreed that each year before Easter there should be a national assessment by the Government and both sides of industry of our economic prospects.
On the question of workers in the public services, both sides have agreed to examine means by which workers in the public services could establish arrangements for negotiating their pay and conditions which would make it unnecessary for them to resort to industrial action. And we agree as a matter of urgency to identify the groups that might be covered by such agreements.
We have also agreed on urgent consultations into the problems of relativities and comparability in pay matters, which are, of course, directly related to the problem of low pay and differentials, and on the continuing arrangements to deal with them.
These objectives have been agreed between us as a guide for action now and in the future, and the joint statement asks trade unions to have regard to all of these objectives from now on.
This is an important beginning, but it will, of course, be necessary for all sections of the community to be involved in this search for a better way. I note that the CBI yesterday published a series of recommendations that overlap some of the matters that I have referred to, and the Government will be ready to have discussions with it to try to secure as much agreement as possible. I appreciate that joint discussions already take place between the TUC and the CBI, and I would welcome their extension.
Our approach is based on the Government's conviction that the most effective and lasting way of improving the conduct of industrial relations is to secure the consent of the trade unions and their members in the manner in which it is embodied in this joint statement.
It is only too easy to propose apparently simple legal answers to these complex issues. They do not exist.
The value of this joint statement is that by discussion, by consultation and, above all, by consent it brings the full authority of the general council of the TUC to bear, alongside the Government, in working out a constructive approach to our economic and industrial future.

Mrs. Thatcher: Before putting three specific questions to the Prime Minister, may I ask whether he is aware that in view of the fate of previous agreements between Labour Governments and the Trades Union Congress—for example, the "solemn and binding" undertaking of 10 years ago, and the social contract under this Government which was sold to the British public as
the boldest experiment in civilised government that Britain has ever seen"—
we are bound to approach this document and the Prime Minister's statement with a healthy scepticism?
Many of the aspirations we can endorse, but we see a gap between the aspirations and the policies that are necessary to bring about those objectives.
Further, we know that the Prime Minister has had a great opportunity to make a national approach to these matters, in view of the widespread concern of our people and a number of offers that have been made to the Prime Minister. We believe that this statement and this document represent a missed opportunity.
I turn to the three specific questions. First, on the economic aspects of the statement, the right hon. Gentleman referred to the aim of achieving a 5 per cent. rate of inflation or less within three years. What difference will that aim make to his conduct of the present wage round, or to the TUC's conduct of it?
Does the right hon. Gentleman believe that the tactics that he is adopting in the public sector at present, of X per cent.—for example 9 per cent. to public sector employees, accompanied by a promise of deferred comparability into the future—is consistent with the image that he is trying to create of a 5 per cent. figure in three years' time? The Prime Minister cannot have it both ways. He cannot aim for 5 per cent. in three years' time yet be deferring increases into next year or the year after.
Secondly, with particular reference to the industrial relations section of the statement and of the TUC document which accompanies it—

Hon. Members: Speech, speech.

Mr. Speaker: Order. Hon. Members must hear the Leader of the Opposition putting her questions. It is a common thing in this House when hon. Members disagree with questions for them still to listen to them. The right hon. Lady is entitled to put her question.

Mrs. Thatcher: Of course, we welcome the extension of secret ballots and "no strike" clauses, but I want particularly to question the Prime Minister under the second head about codes of practice on the closed shop. Is he aware that we believe that codes of practice are no longer enough to deal with this vital subject? They have an important place as a supplement to law, but they are not a substitute for it.
Is the Prime Minister aware that it was a Government of which he was a member which used the law to take away from individual members of trade unions the right to compensation for the loss of a job in the event of the imposition of a closed shop? That right was taken away by the law. It cannot be restored by a code of practice. It can be restored only by the law.
The right hon. Gentleman took away by law the right of an individual member of a trade union to appeal to a court of law if he was excluded?—

Mr. Russell Kerr: Too long.

Mr. Speaker: Order. The House listened in silence to a long statement from the Prime Minister. It must now hear the questions arising from that statement.

Mrs. Thatcher: He took away the right—

Mr. Flannery: On a point of order, Mr. Speaker.

Mrs. Thatcher: They are a frightened lot.

Mr. Flannery: On a point of order. Mr. Speaker. I calculate that we have now had nine questions and five statements from the right hon. Lady. That seems to me to be far too long.

Mr. Speaker: Order. In the course of questions this afternoon, one hon. Member asked four supplementary questions in one. By long tradition, when a statement is made—

Mr. Ernest G. Perry: You said it was a long statement.

Mr. Speaker: Order.

Mr. Cormack: Name him.

Mr. Speaker: Hon. Members must not interrupt me when I am trying to make a statement. By long tradition in this House, when a statement has been made it is not regarded in the same way as if a private notice question had been asked. [Interruption.] Order. Hon. Members must not shout when I am standing, because it is unparliamentary to do so.

Mrs. Thatcher: The right hon. Gentleman took away by law the right of an individual member of a union to appeal to a court of law. He cannot restore


that by codes of practice. Will he introduce law to put right matters that he has put wrong in his own legislation?
Coming to the question of picketing, may I ask whether the right hon. Gentleman is aware that what the great majority of our people want is that picketing should be limited to the premises where the dispute between workers and employers occurs, and to people who are in dispute? This document does not limit it in that way at all but gives Government authority to picketing, not only at the premises of workers in dispute but at the r remises of suppliers and the premises of customers. It goes even further and says that "in exceptional circumstances" action in addition to that may be taken. This is to give Government authority to some of the malpractices that we saw in the lorry drivers' strike. Will not the Prime Minister introduce legislation to put these matters right, in accordance with widespread public opinion?

Finally—[Interruption.]

Mr. Speaker: Order. I cannot hear the Leader of the Opposition.

Mrs. Thatcher: Finally, is the Prime Minister aware that unless he is prepared to back up these codes of practice by introducing legislation—for which he will have widespread support—and by introducing the necessary economic measures, his statement and this document are nothing but a boneless wonder?

The Prime Minister: The right hon. Lady asked me, a long time ago, about the fate of previous agreements. I refer her to the advice and guidance issued by the TUC after a previous bout of industrial dispute that we had—what became known as the "who does what" dispute—which disfigured our industrial relations in the 1950s and early 1960s. No one ever refers to that now. Indeed, younger Members of the House have probably forgotten about it.

Mr. Fernyhough: They probably never knew about it.

The Prime Minister: Probably they never knew about it. The advice issued then by the TUC, as has been the case on so many occasions, was accepted by the unions and this aspect of our industrial relations troubles has been removed.

[Interruption.] I am used to being interrupted. I do not mind. The right hon. Lady should not be so dismissive of the activities of the Trades Union Congress, with which, if she ever came to power, she would have to work. It is an important and responsible element in our community. I sometimes wish that she would drop her nagging and recognise this.
The right hon. Lady is on a fair point if she describes what is contained in this agreement as a series of objectives on which a lot of work has still to be done. That is where we must start from now. As to its impact on the present pay round, it is clear that the higher the level of settlements in this pay round, the more difficult it will be to get inflation down to 5 per cent. within a three-year period. I accepted the advice that I have heard expressed in a number of quarters that perhaps we should not fix a target for one year and that perhaps a three-year attempt upon this national disease would be better. It is better to try to approach it in this way and I am glad that the general council accepts this. I believe that the CBI will do so, too.
As to the impact on current negotiations of this agreement, I am sure that the right hon. Lady will understand if I do not comment—[Interruption.] With respect to hon. Gentlemen on the Opposition Benches, it is better if the House of Commons does not comment now. The negotiations are going on. Public statements made during the course of negotiations are not likely to encourage results. It is for that reason only that I prefer not to enter into answers on these matters.
Turning to the code of practice, I know the right hon. Lady's obsession, over the past month, with the law. It is not an obsession that has been shared by all of the Opposition, certainly not by the right hon. Member for Lowestoft (Mr. Prior), who, only a little over a month ago, was assuring us—this would have been the path of greater wisdom if the Conservative Party had adhered to it, because the recent bout of hysteria will die down—that his attitude was that the practice of the Conservative Party should be to embrace rather than to defeat union power. That was a very wise sentiment, if I may say so. There was nothing that I heard this afternoon


that would encourage me to believe that that is the policy of the Opposition.
Dealing with picketing, I believe that the House will want to read what is contained in the statement. I do not believe that the right hon. Lady has put a fair interpretation on what is said here. It says:
Unions should in general, and save in exceptional circumstances, confine picketing—
That is the operative phrase. It sets out certain exceptions.

Mr. Cormack: Read on.

The Prime Minister: I am ready to read on:
to premises of the parties to the dispute or the premises of suppliers and customers of those parties.
That is what it should be confined to. If the right hon. Lady or the Shadow Foreign Secretary really believe that the law was successful in these matters, they are saying that they have shorter memories than I know them to have. There are problems in all of these areas, problems of getting the consent and acquiesence of the men concerned. What I am saying, what I have consistently said and shall continue to say—and it is here that I believe the right hon. Lady is profoundly wrong—is that we cannot introduce a law, a rigid inflexible law, into a system for governing this code of practice. That is why it is far better to work with the organised representatives, to get their consent and the acquiescence of all those who will be involved.

Mr. David Steel: If the Prime Minister is serious—as I assume he is—in that part of the statement in which he refers to the British people achieving living standards in line with those in the rest of Europe, may I ask why he is not prepared to look at very different political and industrial structures among our European neighbours which have enabled that success to be achieved? Will he accept that while this area of agreement between the TUC and the Government is to be welcomed, as far as it goes—as is the policy of the CBI, announced yesterday—as a further contribution to the discussion, it is no substitute for agreement in this House on the twin and related issues of pay policy and industrial relations? Does the right hon. Gentleman accept that we cannot go on subcontracting our re-

sponsibilites to create a permanent framework for these matters which will survive more than a few months and which will be more than an agreement with one party in government?

The Prime Minister: I am grateful to the right hon. Gentleman for his modified welcome for what I had to say. He is not correct if he has assumed that we were not ready to look at different structures. I have always been impressed by two aspects of the German structure. The first is the attempt to get a national consensus and analysis of the situation—which is contained in this document. The other aspect—I have not had so much support from certain hon. Members on this—is the extension of industrial democracy as it is practised in Germany. The right hon. Gentleman would not be correct to say that we are not willing to draw the best from everywhere. For all its faults, the British trade union movement is just that it has its origins here. I do not believe that we can graft on other experiences without a great deal of consideration. I ask the right hon. Gentleman to consider that.
There is no attempt to subcontract our responsibilities. If there were a public discussion, every year, of a national analysis of the economic scenarios which could emerge, it would be for the benefit of us all. In that move Parliament clearly has its proper part to play.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. Before I call hon. Members to ask their questions, may I make an appeal to the House?

Mr. Ernest G. Perry: All too long.

Mr. Speaker: Order. Is the hon. Gentleman not well? He continues all the time to interrupt. I make an appeal to the House. If hon. Members will confine themselves to a question rather than to argument, I shall be able to call many more of their colleagues in the time that we shall have before we move on.

Mr. Mellish: Will my right hon. Friend take it that the vast majority of the people of this country will recognise that the trauma of January, and certainly of part of this month, would not have occurred if we had had this concordat and agreement last September? Moreover, will he accept that the vast majority of


the people will welcome his statement today, which I believe to be what the nation has been crying out for—an understanding between the Government of the day and the unions? Further, will my right hon. Friend understand that it is to be expected that the Conservative Opposition will sneer and jeer at this and show their contempt for the trade union movement, and that his statement today, if it succeeds, will mean for them the end of so much of their carping criticism, upon which they rely in their hope to take office next time?

The Prime Minister: I think it important that we should try to get our economic and industrial relations right. This is a matter that concerns our national fate, quite irrespective of the fortunes of any party, although, naturally, I hope that my party has at least the greater part of wisdom in this matter. As regards the Conservative Party, I say only that I regard it as a little odd that the party that is always trying to exclude the law from every avenue it can—trying to encourage self-discipline and trying to encourage self-regulation—should now be the party that spurns any attempt at self-regulation and self-discipline and says that we must enforce the law.

Sir David Renton: As for the law, is not the real problem the fact that we have given the trade unions immense power—far greater than that possessed by any other section of the community—but have not made them answerable to this House or to anybody for the way in which they use it, or, indeed, for the way in which their members may abuse it? Why, therefore, does the Prime Minister not accept my right hon. Friend's offer to join in a parliamentary effort to deal with the worst abuses now?

The Prime Minister: I have already answered that question. The right hon. and learned Gentleman was in the House when we had the debates over the original Industrial Relations Act. Surely his memory is not so short that he has forgotten the consequences and the failures of that. If he has, let me remind him of what the former director-general of the CBI said about it. He said that that Act, which attempted to import the law, had sullied every aspect of industrial relations. Those were his words, not

mine. Why return to one's old vomit? Let us try a new way.

Mr. Heffer: Will my right hon. Friend take it that we on the Government Benches will find it very strange if any right hon. or hon. Member cannot accept this document? It is unexceptionable. In fact, it expresses the views of the Labour Party and the trade unions over many years, and it should therefore be welcomed by every Member of the House. But is my right hon. Friend aware that the one failure in the document is in regard to dealing with the immediate situation, and could he indicate that, although we have a long-term project, the Government will put pressure on the Tory councils that are refusing to agree to an increase above the 81 per cent. which the Government have offered to settle the immediate disputes now?

The Prime Minister: My hon. Friend says that there is much of the traditional views of the Labour Party and the Government in this document. That is true. But it also carries our thinking several stages further and forward, and this also has been necessary, I believe, in the light of what has been our experience during the 1970s. I hope that we have all learnt from the 1970s. Certainly, I hope that I have learnt from that experience, and I am not ashamed to say so. I believe that what is contained in this document gives us the basis. There is a lot of work yet to be done on it—it is only a beginning—but it gives us a basis for making a fresh start, and I hope that the whole House —or, if not the whole House, the country—will welcome this new initiative.
As for the current negotiations, for the reasons that I gave earlier I cannot comment on the matters which are now, literally at this moment, I believe, in negotiation between local authorities and the trade unions. With respect, I think it far better that it should be left to them in existing circumstances.

Mr. Donald Stewart: Does the Prime Minister realise that this collection of pious aspirations is now not really enough to take care of the present situation? Since there have been instances, whatever the good faith of the TUC, of the advice of trade union leaders and shop stewards being ignored by strikers, how can the right hon. Gentleman have any


guarantee or depend on the TUC to deliver? What reason has he for believing that this latest version of "Peace in our time" will avoid future confrontation any more than anything we had to last time did?

The Prime Minister: The right hon. Gentleman is, of course, being practically dubious about it, and I understand that. After all, if this were the Sermon on the Mount he would be entitled to say exactly the same about it, except that, perhaps the Old Testament language is rather more imaginative and colourful than this. [HON. MEMBERS: "New Testament."] I beg pardon—yes, the New Testament. But, of course, the right hon. Gentleman is quite right; I do not expect that heaven on earth will dawn tomorrow.
What I am saying to the House—I dare say that the advice will be disregarded in certain areas—is that experience has shown that when members of the general council of the TUC agree among themselves on a series of proposals that should be put to their unions and ask those unions to accept them, that is the best and most likely way of ensuring success. That is what we are basing ourselves on.

Mr. Watkinson: Does my right hon. Friend accept that if frenzied legislation had been passed through the House on strike ballots or on picketing it would not have helped the present situation at all? Does he further accept that an agreement involving consent is a much better way forward? Further, will he explain the part of the agreement dealing with relationships between the public sector and the private sector? Does he agree that there is a linkage between these two sectors and does he accept that it may be necessary to institutionalise that linkage in some way, taking into account not only pay but terms and conditions of work?

The Prime Minister: I agree with my hon. Friend that legislation at this time on such matters as picketing would not have improved the situation. Indeed, I understand that this is the first occasion when the TUC general council has pronounced on such matters as the scope, the discipline and the organisation of picketing, and this—I beg hon. Members opposite who are perhaps not very close to the trade union movement to believe it—will have a substantial effect. Surely, we all want it to have a substantial effect.

I believe that this is the best way forward, rather than legislation.
As for the public and private sectors and the linkage that occurs, the statement is carefully drawn. However, it could lead to an institutionalisation, as I think my hon. Friend said, of arrangements that would make it more possible to determine and set pay in the public sector without some of the disturbances that we have been experiencing.

Mr. David Price: As an industrial manager, may I ask the Prime Minister whether he agrees that the basic contract when people go to work is a fair day's work for a fair day's pay? Does he accept that the nearer to the individual worker negotiations take place on what is a fair day's pay and what is a fair day's work, the more likely we are to achieve success, both socially and economically? Is he aware that in my opinion the missing element in his concordat with the TUC is the absence of a reference to trying to get bargaining units smaller and nearer to the shop floor? Does he accept that in industrial relations small is beautiful?

The Prime Minister: I know that the hon. Gentleman has experience in these matters. It is true that the document makes no reference to the bargaining unit. However, a number of trade unions are moving in that direction. We shall have the difficult job of trying to combine national negotiations that are conducted with national executives with settlements at company level. Those who are experienced and practised in industrial matters will have to work that out for themselves. On that score, I do not think that the Government can find a solution.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. I must tell the House that we canot debate the matter now. We have spent over half an hour on the Prime Minister's statement. I propose to take three more questions from each side of the House.

Mr. Ashton: Is my right hon. Friend aware that many Opposition Members took little interest in industrial relations until about six weeks ago? Will he add one or two extra pages to the report and list the number of times that the TUC has kept its promise in delivering such


things as the £6 voluntary pay rise, followed the year after by the £4 increase and followed by the 10 per cent. increase? Will he list the number of times that the law has been invoked against unions in the past eight or nine years with disastrous results, such as when the law was used against the Shrewsbury pickets, when the AUEW was fined £75,000, when the five dockers were locked up and had to be released by the Official Solicitor, and the number of days lost in strikes when we had the Industrial Relations Act, all of which culminated in a three-day working week and lights going off throughout the country, which brought it almost to anarehy?

The Prime Minister: My hon. Friend has undertaken my task for me. In a short and succinct statement he has put the classic case against the Opposition's present policy—I do not know how long it will last—on these matters. It will be far better for us to try this initiative and to see how it works. Whenever excesses have been committed, our fellow countrymen have recoiled. There is then a return to what we regard as the right way to handle our affairs and living as a community with each other.

Sir Raymond Gower: Although codes of practice and agreements can be helpful and valuable, why does the Prime Minister exclude so completely any legal framework when many countries that are far more successful than the United Kingdom have found some legal sanction and background necessary and valuable?

The Prime Minister: Because in the United Kingdom it has not worked.

Mr. Urwin: In view of the churlishness with which the Leader of the Opposition received my right hon. Friend's statement, does he agree that she would have been better advised to take a little time to pay tribute to the trade union movement for the enormous contribution that it has made to the reduction of inflation over the past three years? In the ensuing tripartite discussions that my right hon. Friend will be undertaking with the CBI and the TUC, will he keep at the forefront of the agenda the importance of the introduction of a form of industrial democracy, which of itself

could make a major contribution to conquering the ills from which the country is presently suffering?

The Prime Minister: It is proper for me to say that the TUC has kept its undertakings on many matters. The House should not attempt to deny that. Unfortunately, for reasons that I shall not go into and on which there are various ascriptions of responsibility, we did not have such an agreement with the TUC earlier this year. As has already been said, that lack of agreement was responsible for some of the troubles that we have gone through. However, I hope that we can make a new start and find a better way. My right hon. Friend will note that the extension of industrial democracy and accountability is covered in my statement. He will also find that that is in the joint document that is being issued.

Mr. Crouch: Will the Prime Minister let us know what he understands a concordat to mean? Does he agree that it is an agreement between two parties to observe a certain course of action? If he accepts that definition, is he satisfied that a concordat can be achieved within the trade unions between the leaders and their members?

The Prime Minister: The hon. Gentleman chooses his own word to describe the document. It is not my word. It may be a word that he has culled from the press. On the whole, we prefer to choose our own titles and not those that are thrust upon us by the hon. Gentleman or the press. I have never used the word "concordat". I am not sure that I understand it.

Mr. St. John-Stevas: I do.

The Prime Minister: I am sure that the Shadow Leader of the House is able to give me a very good definition. No doubt he will do so if I give him half a chance.

Mr. St. John-Stevas: Mr. St. John-Stevasrose—

The Prime Minister: No, the right hon. Lady will not like it.
The trade unions are voluntary organisations in the degree of control that they exercise over their members. That which has happened over the past 18 months has been to some extent an eruption of basic feeling from the rank and file at


workshop level that the leaders have not been able to control. There is a dilemma. At one and the same time the unions are accused of being too powerful and too weak. Both those assertions may be true. I have found in the past—I know that the hon. Gentleman tries to make a fair approach to these matters—that if the general council sets its hand to something it can usually, by means of persuasion and the authority that it carries, secure general agreement. I am not saying that there will be agreement in every instance and in every way. However, I am certain that the document marks a great step forward for us.

Mr. George Grant: I appreciate the statement made by my right hon. Friend. I think that it is progress. As a life-long trade union member I understand the difficulties that arise after three or four years of restraint. It is my opinion that the present wave of strikes—

Hon. Members: Ask a question.

Mr. Speaker: Order. The hon. Gentleman may find a way of expressing his opinion through his question, but it must be put as a question.

Mr. Grant: I shall do that quickly, as I always do. The present wave of strikes is not against the Government and not against employers—

Hon. Members: Question.

Mr. Grant: Does my right hon. Friend accept that the present wave of strikes is not against the Government and not against employers but against the trade union membership? Everybody is seeking a larger slice of the cake, and while the squabbling takes place the size of the cake is getting smaller. In my right hon. Friend's discussions with the trade union movement, has he suggested that the way forward is not legislation but for the trade union movement, through the TUC, to have the blessing of individual unions to have arbitrary powers in discussing our present difficulties and making decisions?

The Prime Minister: My hon. Friend has longer and more practical experience than most hon. Members have of working in the mining industry and I welcome any contribution that he wishes to make in the House. He also speaks with the knowledge and practical experience of those

who have sent him here. I agree with him that whenever there has been a period of wage restraint there have always been difficulties afterwards. He is right in saying that the basic problem now is that everybody is seeking, first, to find how to get a bigger share of the cake and, second, how to increase the size of the cake.
The miners of this country, by their actions over the last 12 months and by their present actions in negotiation, have shown that they are not attempting to force a confrontation with the Government, or, indeed, with the Coal Board. I know that my hon. Friend will continue to use his influence with them to see that they get a fair share of the cake but that they do not push their claim beyond the limits that the industry will bear.

Mr. Higgins: After the experience of the Ford dispute, is it not hopelessly inadequate for the statement to do no more than say that contracts should be observed? Should we not at least give an opportunity for those on each side of industry who want to make contracts which are enforceable in the courts to do so?
Since the agreement does nothing whatever to prevent picketing that is carried out by individuals who are not members of trade unions and who have nothing to do with a particular industrial dispute, should we not at any rate legislate to make that illegal?

The Prime Minister: I recognise that the hon. Gentleman has not yet had time to read the code, but he will find that it places picketing under the control of the union that is in dispute, and therefore there is no need for the law to be introduced in this controversial area.

Mr. Prior: Is the Prime Minister aware that his statement this afternoon is disappointing, inasmuch as it does nothing to restore the balance in collective bargaining that is so necessary? Is he further aware that when he says that the law has not a part to play he is underestimating the laws that the Labour Government have passed in the last four years, which have done so much to make that balance less equal than it was before? Is he aware that there is an overwhelming desire in the country and in the House for a limited change in the law, which would have an effect on picketing—such


as my hon. Friend the Member for Worthing (Mr. Higgins) has pointed out— and on the closed shop? Even the Prime Minister, in the past few days, has admitted that it is unfair as it operates at the moment. There is also a need for secret ballots, which could do much to ensure that trade union representation was more democratic than it is at the moment.
To say in 1979, after the experience of the last 10 years, that the only way in which we can proceed is along the lines of the statement this afternoon is a counsel of despair that we on the Opposition Benches cannot accept.

The Prime Minister: But I am not the only one who says it in 1979. The right hon. Gentleman was saying it on 8 January 1979. Indeed, there has been no more sudden conversion since that of St. Paul on the road to Damascus. At least I got that biblical quotation right, Mr. Speaker. The right hon. Gentleman's new-found zeal is being prosecuted in a very bad cause, and I fear that he really knows it.
When the right hon. Gentleman studies the code he will find that there is a strong recommendation from the general council to unions that they should adopt secret ballots. I will not attempt to describe the wording that is used. I think that that is an extension that the right hon. Gentleman, at least until 8 January, would have welcomed. He would not have thought that the law should be introduced to enforce a recommendation of that sort.
It is not my view—and I have never expressed it as such—that the law has no part to play. After all, the law plays a very considerable part in industrial relations. What I have said—experience has shown it to be true, and I stand by it—is that the law has failed in certain of the issues that the Opposition are now putting forward. That is why we want to try the new way.
With regard to restoring the balance in collective bargaining, the weight has shifted to some extent certainly since the war, but that is best dealt with by restraint. The hero of the Conservative Party, Harold Macmillan, said that it can best be achieved by everyone not pushing his weight to the extreme limit. That is a far better way of doing it—Harold

Macmillan was far wiser—than trying to impose the law.

Mr. Gow: On a point of order, Mr. Speaker. You will remember that during the Prime Minister's statement he told the House that a copy of it, and of the documents annexed to it, had been placed by him in the Vote Office. At 4.2 p.m. some hon. Members were trying to obtain copies of the statement and of the documents annexed to it. At that time the deliverer of the Vote—I am talking of the position at 4.2 p.m., which was well after the Prime Minister had sat down—

Mr. Speaker: Order. It has been indicated to me that the document is now in the Vote Office. That might solve the problem of the hon. Member for Eastbourne (Mr. Gow), at least for the time being.

Mr. English: On a point of order, Mr. Speaker. You said earlier that you would call three more Members from each side. As a Member of the Opposition Front Bench rose, you called four speakers from the Opposition Benches. Could we not have one more speaker from the Labour Benches? If so, may I ask my question?

Mr. Speaker: Order. Those hon. Members who are in the Chamber regularly on such occasions—as I believe the hon. Member for Nottingham, West (Mr. English) usually is—will know that when I have said, on many occasions, that I will take three more speakers from each side, that exempts the Front Bench, as I always call a speaker from the Front Bench to put a concluding question. I have said that before and I hope that I shall not have to say it again.

Mr. Brotherton: On a point of order, Mr. Speaker. You will recall that some minutes ago my hon. Friend the Member for Canterbury (Mr. Crouch) asked the Prime Minister to give his definition of "concordat". I wonder whether it would be of assistance to the House if I were to tell the House that—

Mr. Speaker: Order. That would require a concordat on the part of the House, and the hon. Member for Louth (Mr. Brotherton) has no such concordat.

Mr. Rooker: On a point of order. Mr. Speaker. I am not seeking to challenge you, but we have heard from the Prime Minister today one of the most important


statements that he has made since achieving his present office. The Order Paper today places no time limits whatever on the House. After 10 p.m. we shall be on exempted business. If you, in your wisdom, Mr. Speaker, were to allow a few more minutes for questions arising from my right hon. Friend's statement, the time would not be taken from that allocated to any other business of the House. I know that my right hon. Friend will not wish to run away from Opposition questions. I also know that Labour Members wish to press him particularly on the issue of low pay, on which no questions have been asked so far.

Mr. Speaker: When there are questions following a major statement, it is always difficult to decide when to call it a day. However, I exercise my judgment to the best of my ability.

AIRCRAFT AND SHIPBUILDING INDUSTRIES ACT 1977

Mr. Maxwell-Hyslop: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the discovery that Statutory Instruments Nos. 539 and 540 of 1977, which purport to set a date upon which the assets of firms nationalised by the Aircraft and Shipbuilding Industries Act 1977 vest respectively in British Aerospace and British Shipbuilders, are invalid, and such purported vesting therefore a nullity in law.
I took to your office at 9 a.m. today, Mr. Speaker, a notice that I wished to raise this matter today under Standing Order No. 9. For a completely different reason, I had cause to check the dates when these two orders were made. I then glanced at the text and noted that the section of the Act which allegedly empowered the Secretary of State to make such orders was section 56(1) of the Aircraft and Shipbuilding Industries Act. This rang no bell with me as conferring any such power, so I checked the text of the Act.
Sure enough, section 56 is not an empowering section at all but an interpretation section. In its relevant paragraph it merely defines the meaning of the two phrases "aircraft industry vesting date" and "shipbuilding industry vesting date" respectively. It attaches a specific legal import to these two phrases in the event that the Secretary of State should make an appropriate order by statutory instrument. But it specifically does not endow him with the power to make any such order by statutory instrument. It refers to
the purposes of section 19(1) of this Act".
But section 19(1) of the Act does not empower the Secretary of State to make such an order either, nor does any other section or schedule of the Act.
Without statutory empowerment to make such an order, statutory instruments Nos. 539 and 540 of 1977 are ultra vires and therefore invalid.
Subsections (7) and (8) of section 1 of the Aircraft and Shipbuilding Industries Act 1977 do indeed empower the Secretary of State to make certain orders by statutory instrument subject to annulment


in pursuance of resolution by either House of Parliament. But the exercise of this power is confined to alterations in the name of either corporation and does not include the fixing of a vesting date.
That this matter is specific must be clear. It is important because it means that both corporations are in unlawful possession of the assets purportedly taken into public ownership on the purported vesting dates, and cannot lawfully make use of those assets or enter into contracts which assume ownership of them. It should have urgent consideration so that the House can consider what action ought to he taken to mitigate the results of the Secretary of State's ultra vires action in making these two orders without statutory power so to do.

Mr, Speaker: The hon. Member for Tiverton (Mr. Maxwell-Hyslop) gave me notice before 12 o'clock this morning that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the discovery that Statutory Instruments Nos. 539 and 540 of 1977, which purport to set a date upon which the assets of firms nationalised by the Aircraft and Shipbuilding Industries Act 1977 vest respectively in British Aerospace and British Shipbuilders, are invalid, and such purported vesting therefore a nullity in law.
I listened with very great care to the hon. Gentleman, and I followed, as best I could, the arguments which he presented to the House. I have given careful consideration to the hon. Gentleman's representations, but I have to rule that his submission does not fall within the provisions of the Standing Order, and, therefore, I cannot submit his application to the House.

EDINBURGH SCHOOLS (INDUSTRIAL DISPUTE)

Mr. Rifkind: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter which I believe should have urgent consideration, namely,
the decision that has been taken, as a result of industrial action, to close all schools in the Edinburgh area from tomorrow, including those for the mentally and physically handicapped.
It is ironic that on the very day that the Prime Minister has announced a new relationship with the trade unions which will lessen industrial action a decision has been taken by the National Union of Public Employees to intensify industrial action in the East of Scotland. As a result of this decision, already a number of distressing consequences have become apparent. From tomorrow, all 200 schools and colleges in the Edinburgh area will close, not simply for a day but for an indefinite period.
Secondly, as a consequence of this decision, over 80,000 pupils and students in the Edinburgh area will have no education—either today or the day following, or for all that period for which this industrial action continues.
Thirdly, as a result of this action, those pupils and students who are preparing for examinations will have no facilities made available for their preparation unless, in the words of the chairman of the Lothian education committee, they receive the cooperation of NUPE—such co-operation which as yet has not been seen to be forthcoming.
Fourthly, a distressing consequence of this action, impressing the urgency of the matter, is that the meals-on-wheels service for the elderly, supplying meals which have always been prepared in the school kitchens, will no longer be able to be prepared, and, although it is hoped that alternative facilities will be made available in the social work department, there is no evidence as yet that these will meet the requirement.
Most seriously, the consequence of this action and the decision by NUPE not to make any exemption at all in its industrial action, is that those schools for the mentally and physically handicapped


will not be open and there will be no facilities provided for the mentally and physically handicapped youngsters in the Edinburgh area for the indefinite future. It is ironic that the Labour majority group on the Lothian region education committee, which is the only majority group in Scotland to have come out in support of the NUPE pay claim, has received no thanks for this—showing that appeasement does not appear to produce any results in this action.
The urgency of this matter is emphasised by the fact that if, at a time when there is so little compassion in industrial disputes, the mentally and physically handicapped, children and the elderly can be made to suffer as a consequence of a pay dispute, this dispute is an urgent and important matter that Parliament should be able to discuss.

Mr. Speaker: The hon. Member for Edinburgh, Pentlands (Mr. Rifkind) gave me notice before 12 o'clock this morning that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the decision that has been taken, as a result of industrial action, to close all schools in the Edinburgh area from tomorrow, including those for the mentally and physically handicapped.
The House will understand that I listened with more than usual anxiety and care to what the hon. Gentleman said. He has raised very serious issues. The House knows that I am instructed, when I give my decision, not to give reasons why I have reached the decision that I announce. After careful consideration of the hon. Gentleman's representations, I have to rule that his submission does not fall within the Standing Order, and, therefore, I cannot submit his application to the House.

INDUSTRIAL SITUATION (SHEFFIELD)

Mr. John H. Osborn: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter which I believe should have urgent consideration, namely,
the industrial and commercial chaos in Sheffield and South Yorkshire today, due to heavy snow, and, because of an industrial dispute, the consequential failure to grit, maintain and clear main roads, causing a complete breakdown in public transport, the movement of private vehicles and the provision of goods transport, thereby severely inhibiting the industrial life of the city.
As today there are several applications under Standing Order No. 9, Mr. Speaker, I shall be brief.
Sheffield today is a ghost city. That is due not only to heavy snowfalls but to the inability to clear them as has been traditional. It is a situation that many people in London today may regard as unreal, but it is very real in the city of Sheffield.
At noon today, most main roads in and around Sheffield had not been gritted or cleared due to guerrilla action by public employees. I understand that the parkway into Sheffield was frozen solid and that all roads, where there was the slightest incline, had been either closed by police or were littered with vehicles unable to move. Bus services have been suspended. Commercial life is at a standstill. Many shops are empty, with few customers and even fewer assistants to serve them.
After discussions with the Conservative opposition leaders of the county and city councils, as well as with the chamber of commerce, it is reported that in many factories, shops and commercial premises employees will be leaving early. Once again, essential services for maintaining employment in the city, and a reasonable standard of domestic life, have not been provided by the South Yorkshire county council or the Sheffield city council.

Mr. Canavan: Come on, hurry up.

Mr. Osborn: It is particularly ironic for the citizens of Sheffield, and those concerned about their future employment opportunities, that only a week ago the


city council should have passed a vote of thanks to its employees for keeping the roads open and pavements clear—not very relevant today.
In my case, the situation is also ironic. I flew back from Luxembourg to discuss with industrial leaders and fellow Conservatives the impact of industrial unrest on the life of the city and its ability to meet commitments to its customers worldwide. The Prime Minister's platitudinous statement today about the concordat with the TUC will in no way have alleviated this concern to maintain the day-to-day life of the city. I regard this as a matter of urgency and requiring a debate today.

Mr. Speaker: The hon. Gentleman gave me notice before 12 o'clock this morning that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the industrial and commercial chaos in Sheffield and South Yorkshire today, due to heavy snow, and, because of an industrial dispute, the consequential failure to grit, maintain and clear main roads, causing a complete breakdown in public transport, the movement of private vehicles and the provision of goods transport, thereby severely inhibiting the industrial life of the city.
The hon. Gentleman has brought a very serious matter to the attention of the House. I listened with care and concern to what he had to say. He knows that I decide not whether the matter shall be debated but merely whether it shall be debated tonight, as he has requested, or tomorrow. I regret to have to tell the hon. Gentleman that his submission does not fall within the Standing Order and, therefore, I cannot submit his application to the House.

Mr. Molloy: On a point of order, Mr. Speaker.

Mr. Speaker: Before I call the hon. Gentleman, may I say that I can always manage without cheers when I give the result of an application under Standing

Order No. 9, because, if I accept that cheers are in order, groans and disapproval are equally in order.

Mr. Molloy: I do not wish to detain the House, but there has been a further spate of applications under Standing Order No. 9. I have listened to them all. One seemed particularly poignant and serious, but the others did not seem to come anywhere near the principles of Standing Order No. 9. May I respectfully request of you, Mr. Speaker, if at all possible, to reconsider the application under Standing Order No. 9 that I made yesterday?

Mr. Speaker: The hon. Gentleman may ask me, but he should not be too optimistic.

Mr. Emery: On a point of order, Mr. Speaker. Obviously you have to interpret the rules of the House as they have been established by the House. As the Leader of the House is present, and as in the past few months the use of Standing Order No. 9 for constituency matters —it never used to be so used—has become much more prevalent, I wonder whether he ought to consider asking the Sessional Procedure Committee to look at this matter in view of what has occurred recently.

Mr. Speaker: The hon. Gentleman is the third hon. Member—one right hon. Member and two hon. Members—who in recent days has drawn attention to this matter. The Leader of the House will have heard what has been said, and I have nothing further to say about it.

Rev. Ian Paisley: Further to that point of order, Mr. Speaker. Surely the right of an hon. Member to raise a matter that is of urgent importance to his own constituency should not be challenged in this House.

Mr. Speaker: It is an old custom that hon. Members find their own ways of raising constituency matters. Other avenues are also open to hon. Members.

SECONDARY PICKETING (ABOLITION)

4.46 p.m.

Mr. Peter Temple-Morris: I beg to move,
That leave be given to bring in a Bill to make illegal the picketing of any premises during an industrial dispute other than those directly connected with the said dispute; and for purposes connected therewith.
At the outset, I should say that we are dealing with a real problem. I think that Members on both sides of the House will agree with that. I move this motion in a spirit which I hope will not include union bashing, and I hope that any response from the Labour Benches will not include words such as "jackboots". The hon. Member for Luton, East (Mr. Clemitson) was kind enough to tell me yesterday that he was considering whether to oppose the Bill. Should he be opposing me, I am quite confident that he will approach this debate in the same spirit in which I am initiating it.
I think it is common ground that we face a problem about which the country expects Parliament to take some action. Quite apart from what he said today, the Prime Minister has said that he is not very much in favour of secondary picketing. He has further said that no group has rights over and above the community as a whole. This proposed measure is an effort to translate those bold words into some kind of parliamentary action.
Should the Bill be opposed, it would be yet another example of the Parliamentary Labour Party being fully out of step with the Labour Party in the country, quite apart from the rest of the country. According to a recent MORI poll, which received considerable publicity last week, the Labour Party in the country stands united with the Conservative Party in the country, and, I trust, in Parliament as well. Any hon. Member who opposes this Bill ought fully to realise that, according to that poll by MORI—which, after all, is the Labour Party's private pollster—85 per cent. of Labour voters and 86 per cent. of trade unionists are in favour of a ban on secondary picketing.
The scope of the Bill is limited—I am the first to admit that—to one facet of a very difficult problem. I do not begin to pretend that it is the beginning or end of the matter. Goodness knows, we have

enough trouble from primary picketing. The Bill simply deals with one major sector of abuse, and applies the law to what is potentially a situation which can become criminal. We have seen examples of that. Therefore, the law has to be clear.
By way of definition, picketing under the Bill would be limited to
at or near the place of employment concerned",
be it a depot, a head office, a factory or whatever.
Why is legislation necessary? First, we should put picketing overall in a proper context. I do not want to be over-legalistic, but there is no legal right to picket as such. That right comes from exemptions to what we all know to be the law. If it is a case of legislative exemptions, the law should properly regulate this situation.
It is claimed in certain parts of the House that the civil law can cover the matter. But the law is confused. I need only remind the House of the occasion when the Attorney-General stood at the Dispatch Box a little while ago and from some of the comments which emanated from his supporters, let alone what the lawyers amongst us felt, it was clear that this House was in a total mist of legalistic confusion. So much for the civil law.
Can this House possibly tolerate the concept of lawful intimidation? The civil law is inadequate in any event because it has to be enforced by a mass of injunctions served individually on pickets. Those injunctions take time to resolve and other pickets could replace the pickets concerned during that time.
It is claimed that the remoteness concept covers this matter, and about that I would add one important comment. If we as politicians begin to rely on a judicially administered remoteness concept, we risk bringing the judiciary permanently into one of the most delicate areas of British politics. That is utterly and completely wrong.
Legislation is necessary so that the police may have clear-cut powers. They should not have to observe picket lines, keeping an ear to the proverbial ground, wondering whether there has been intimidation and whether there is evidence of it, and then, if we follow the Attorney-General's thinking, whether that intimidation is lawful.
It is the duty of the law to protect the majority. The vast majority in these disputes are third parties who have no part in the disputes; they have no say in a code of conduct, concordat or anything else. Most important, they have no say in the way in which that code of conduct or concordat is construed and put into practice. It is clearly necessary for us to legislate about that.
In order to illustrate that there is no other way of dealing with the problem, I shall make two further points. We have heard a lot about a voluntary code this afternoon. As we have seen from recent experience, that will not work. Code or no code, the present situation is part of the far wider issue of trade union leadership control over its members.
The most recent example of this was the road haulage dispute. Whilst I would be the first to admit that the code helped to modify matters in places, I believe that it is a fact that that dispute was not resolved by any code but by the employers conceding virtually the whole claim.
We hear a great deal about the argument that we cannot legislate on the trade unions because we canont enforce such legislation. I suggest that that is a weak argument. This House has a duty, when it sees a clear problem, to deal with it by legislation.
We have heard it said this afternoon that the oft-quoted Industrial Relations Act was ill fated. Remarks such as "Oh, that didn't work. If we could not enforce that, how could we enforce anything else?" have been made. I must say—and I will do so briefly but I hope effectively—that one of the main reasons why that Act did not work was the attitude of the then Opposition. They failed to live up to their previous policies which they knew perfectly well, when in Government, were right. That is why it did not work. If the Opposition of the day realise that legislation on trade unions or anything else is necessary, such legislation is enforceable. Further to this, if we cannot enforce the law, how on earth can we enforce a code of conduct?
May I remind Labour Members, and hon. Members generally, of the serious-

ness of the overall situation and put some simple facts to them? It is a fact, and I defy anybody to say otherwise, that we are tolerating the possibility of minority power being able to blackmail the nation. It is further fact that there has been intimidation, extortion and blackmail. The problems associated with those three matters were admitted by Mr. Kitson and Mr. Moss Evans—and hon. Members can put that in their pipes and try to smoke it.
Another fact is the losses to individual workers, companies, production, exports and shipping. They have been enormous.
What has happened is an abuse of democracy. We all know that what has happened could happen again. It was summed up by a judge in a judgment. I shall not go into the details of that judgment or discuss whether he should have said it, but a judge was reduced to saying that there was a presumption that Parliament would not legislate to bring about its own destruction. If we get to that stage, this nation screams out for some action from Parliament.
I commend this motion to the House.

5.56 p.m.

Mr. Ivor Clemitson: The hon. Member for Leominster (Mr. Temple-Morris) has addressed himself to some serious and important matters concerning picketing. It is important that such matters should be discussed in this House. It is also important that in discussing these issues we do not rush into hasty judgments, however serious the situation may be at the time, or fail to consider all the arguments and counter-arguments coolly and soberly.
The hon. Gentleman referred to the MORI opinion poll. It is important that the public outside the House should be made aware of all the arguments in the matter. We have a duty to inform public opinion.
The object of the Bill, as I understand it, is to ban what has become known as secondary picketing, or, to put it more accurately, to limit the immunities from civil actions for breaches of contract which pickets enjoy to picketing outside their own place of work. Why does the hon. Gentleman wish to impose such a


limitation? The answer must be because of the effect that has been achieved by secondary picketing. It has had an effect. If secondary picketing had had no effect the Bill would never have been introduced, because it would not have been needed.
In other words, we are saying that a large number of people have not crossed picket lines. Why have they not crossed the picket lines? Surely there are, logically, only two possible answers. The first is that the pickets have peacefully persuaded people not to cross the picket lines. People have, of their own free will, decided not to cross the picket line. The other explanation is that people have been prevented from crossing picket lines by violence, threats of violence, extortion, intimidation, or whatever else it may be. All the incidents that have been drawn to the attention of the House in recent weeks fall into the second category. If they were true—I do not wish to judge any particular incident—they are criminal offences under the law as it stands. It is against the law to use violence, to threaten to use violence or to obstruct the highway or footpath in order to prevent people going about their lawful business. It is also against the law to extort money from people or to attempt to do so. Whether they are connected with primary picketing, secondary picketing, tertiary picketing, or whatever, all such actions are against the law. They are actions that should be totally condemned by the House. They have nothing to do with the true spirit and purpose of trade unionism.
The real problem is not whether picketing is primary or secondary but whether it is properly conducted. That is the problem. If criminal acts are taking place, the answer lies not in changing the law but in seeing that the law is properly enforced. If it is said that one of the difficulties of enforcing the law is the difficulty of interpreting it in any situation, because situations vary, the answer surely lies not in attempting detailed legislation but in sensible and agreed codes of conduct. My first objection to the hon. Member's Bill is that he has wrongly identified the problem.
However, if the hon. Member says that he objects to secondary picketing, however peacefully or properly it is conducted, he is really saying that he objects to the

degree of power which trade unions have. That brings me to my second objection to the Bill.
The hon. Member appears to share the analysis that we have heard on a number of occasions from the Leader of the Opposition that the balance of power between trade unions and employers is tilted too far in favour of trade unions and that that balance must be redressed. One of the ways of redressing it is to curb the effectiveness of picketing by banning secondary picketing. That is the argument that the hon. Member was really advancing this afternoon.
I believe that that argument is profoundly misconceived, and therefore we should resist all the practical proposals that flow from it. I am not saying for one moment that trade unions do not have considerable power; of course they do. Neither am I saying that the trade unions' power has not increased over the years; of course it has. But to approach the question of the power of trade unions in quantitative terms—whether it is too little, too much or just right—is negative and sterile. The approach that we should adopt is a positive one. We must ask ourselves how trade union power can be used and channelled into constructive and productive directions. In other words, how can we develop democratic ways of running our industries and services?
The hon. Member has said that he wants the House to give a lead to the country in this matter. I believe that we should give such a lead, but I differ from the hon. Member about the kind of lead that we should give. I believe that the lead that we should give should be in stimulating informed debate on the subject, and encouraging codes of practice for picketing. The hon. Member believes that new laws are needed. I believe that he is wrong in two fundamental respects. He is wrong, practically, in confusing the real problem of abuses of picketing with the question of where it takes place, and he is wrong, philosophically, in his negative approach to the question of trade union power. For those reasons I oppose his Bill.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring


in Bills and Nominations of Select Committees at Commencement of Public Business):—

The House divided: Ayes 187, Noes 170.

[See Division No. 79—at columns 1263–64.]

Question accordingly agreed to.

Bill ordered to be brought in by Mr Peter Temple-Morris, Mr. Stephen Ross, Mr. W. Benyon, Mr. Robin Hodgson, Mr. John Hannam, and Mr. Roger Moate.

SECONDARY PICKETING (ABOLITION)

Mr. Peter Temple-Morris accordingly presented a Bill to make illegal the picketing of any premises during an industrial dispute other than those directly connected with the said dispute; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 16 February and to be printed. [Bill 86.]

Orders of the Day — BANKING BILL

As amended (in the Standing Committee), considered.

5.15 p.m.

Mr. Ian Stewart: On a point of order, Mr. Deputy Speaker. I feel that at this stage in our proceedings I ought to place on record the fact that, in my view, the House has been placed in an embarrassing position by having to deal with the Report stage of this complicated Bill without having had sufficient time to consider the amendments and proposals that are to be suggested on Report.
It is obviously too late to seek a rearrangement of the business of the House in order to take the Report stage at a later date, but many material amendments were tabled only on Monday and were therefore available in print only yesterday. I also received yesterday a long and important letter from the Minister of State, as a result of which I should like to have tabled further amendments and to have considered the possibility of amending some Government amendments —not to mention the fact that we have had no time to have consultations with parties affected by the proposals.
I understand that a number of amendments promised by the Minister are not ready for the Report stage. My complaint is not against the Minister and his officials. They have done everything in their power to keep me abreast of events and I am grateful to them, but it is unsatisfactory that the House should come to the Report stage of an important Bill when, on the admission of the Minister involved, that Bill is in an incomplete state.
If we are to take the Report stage now, it should be understood by those taking part and by those who may pay attention to what we are discussing that the Bill is incomplete because of the pressure of time, which was not called for by the nature of the Bill.

Mr. Peter Emery: Further to that point of order, Mr. Deputy Speaker. It should be pointed out that there are 25 Government amendments covering 11 quite involved subjects and they were tabled only on Monday.
I do not blame the Minister or his officials. They were politeness and cooperation personified in Committee, but there is something wrong with the organisation of the business of the House, particularly when we are not in a massive rush to get the Bill on to the statute book. Another two or three weeks would have no great bearing on the matter.
It is much more likely that the House will have to deal in greater depth with Lords amendments because certain aspects will have to be dealt with in another place and will have to come back here. While that is, of course, in order, it is never the most satisfactory way of dealing with important matters.
It is sometimes necessary to rush through important Bills, but this Bill does not come into that category and we do not have a whole host of legislation to get through in this Session.
I should be obliged, Mr. Deputy Speaker, if you could point out to the officials who organise our business the dissatisfaction of certain Conservative Members and our concern that the normal process of allowing time for consultation and consideration of Government amendments on Report should be observed in future.

Mr. Deputy Speaker (Mr. Oscar Murton): Both hon. Members have aired their views. However, both have been Members of the House for a considerable time and they know that that matter is not one for the Chair. No doubt it has been noted in other places.

Clause 1

CONTROL OF DEPOSIT-TAKING AND MEANING OF "DEPOSIT"

Mr. Emery: I beg to move amendment No. 1, in page 1, line 17, at end insert:
'or
(c) Notwithstanding Schedule 1 of the Bill, the business is the National Giro.'.

Mr. Deputy Speaker: With this we may take amendment No. 28, in schedule 1, page 54, leave out line 7.

Mr. Emery: Basically, the Opposition believe that where similar organisations are operating in both the public and the private sectors and where a nationalised industry or other public sector body is in

competition with a company in the private sector, the rules and the supervision of both organisations ought to be not only similar but the same.
I believe that that is a fair statement of principle affecting all nationalised industries. In this Bill, it affects especially the banks and a body which is now in competition with the banks—the National Giro.
The Opposition consider that the National Giro should not be excluded by the Government from the provisions of this new Banking Bill. This is especially important because, for the first time in any major sense, regulations are being produced by the Government for the organisation, structuring, control and policing of banks in general.
It is always a matter of concern to the Opposition when the general principle which I have expounded of the same control and the same structure for both public and private sector companies is deviated from by the Government, and we wish to look at the special position created by it. No one can argue that by excluding the National Giro from the Bill a special position is not being created.
When we consider banking, I am sure that the Minister will understand if there is considerable suspicion in the minds of the Opposition. We recall the 1976 Labour Party conference when, by a two to one majority and nearly 5 million votes recorded, a proposal was carried to nationalise the major banks. If this amendment is not accepted, the National Giro will be excluded and will continue in a special position in the banking and financial world.
I am in no way attacking the National Giro. As my speech progresses, I hope that hon. Members will appreciate that I wish to ensure, as I have always done, that when this House decides an industry shall be nationalised, it becomes a major asset of the nation and that it is the duty of the Government and of this House to ensure that it operates as efficiently, profitably and reasonably as humanly possible. At the same time, however, we have to ensure that all nationalised industries—and in this instance the National Giro—operate in such a way that competition with private sector companies is equal and fair.
When we consider the history of the National Giro, it may be understood why


initially it might be considered that it should be excluded from the Bill. When it was established in 1968, the purpose was to provide a rapid and convenient money transfer system through the Post Office. However, the National Giro now offers an expanding range of banking services to private users, to public bodies and to commerce. In 1975, the then Secretary of State for Industry announced that the Goverment had decided upon a number of measures to set the National Giro on what he described as "a surer foundation", and this was all explained in the White Paper entitled "The Development of the National Giro"— Command 6344.
The wider banking services are very considerable. Under legislation then existing, the Government authorised the expansion of National Giro banking facilities to include facilities for personal loans and personal overdrafts, and overdrafts for local authorities, nationalised industries and business customers on terms which were quite competitive with those of other lenders in the financial world. It was also accepted that the National Giro should be authorised to provide other banking services, such as credit cards, cheque guarantee cards, bridging loans and so on. However, in order to do all this the changes in the capital structure required involved legislation, and in 1976 the Post Office (Banking Services) Act was passed.
There are some problems in that the National Giro accounts are part of the Post Office accounts. However, it is interesting to note that in a report setting out the views of the Post Office on the White Paper, it was pointed out that the growth of the National Giro had been set stretching profit targets by the Government and that the competitiveness of its charges to business was demonstrated by the continuing rapid growth with deposits into accounts of businesses reaching £10,000 million per annum. That strikes me as an immense figure, and I believe that an additional nought has crept into it.
The report went on to say that the National Giro was handling more than 250 million transactions per annum and that in its tenth year of operation it was moving from the strong and flexible base which had been established.
The accounts are very simple. Indeed, under the Companies Act they would not be acceptable for a bank; they would have to contain much more information. However, from them we are able to see the income of the National Giro in the year 1976–77—the Library does not yet have the 1977–78 accounts—set against an expenditure of £61 million. It is interesting to note that the retained profit for the year, after interest had been paid, is shown as a deficit of £0·9 million. I hasten to add that that is mainly because the postal order service is included in the accounts, the deficit being taken up mainly with the postal order service which is considered to be a social service of the Post Office and which is fairly expensive.
5.30 p.m.
I do not find these accounts for a banking organisation as satisfactory as I should like. I would be much happier if control of the National Giro, as envisaged for other banking institutions in the Bill, came from the Bank of England. I understand that legislation places prime responsibility on the Treasury in coordination with the Department of Industry, which is responsible for the Post Office, but that the Bank of England is also involved in decisions of control. Those who have worked in Whitehall know that it is never satisfactory for two or three organisations to be concerned with overall control of something as important as a major banking institution.
As the Bank of England is already partially involved, why should we not include the Giro as a financial institution covered by the Bill? It is fair to say that public sector organisations need just as much overall supervision as those in the private sector.

Mr. Nicholas Ridley: Much more.

Mr. Emery: My hon. Friend says "Much more". I cannot avoid drawing attention to the Crown Agents and the large loss by that public sector organisation. I am not making a major point, but it illustrates how public sector control was inadequate. We now have legislation to alter the whole structure of the Crown Agents.

Mr. Ian Wrigglesworth: The hon. Gentleman would presumably


not want to forget private sector organisations like London and County Securities, United Dominions Trust, Mercantile Credit or many of the other bodies which, like the Crown Agents, got into financial difficulties.

Mr. Emery: I am not saying that private organisations have not got into trouble. The point I was making was that there is as much need for supervision in the public sector as in the private sector.
I would like to discuss the position which the Government have previously taken over the National Giro in relation to this Bill. They say that it should be exempted because it is the responsibility of Ministers and already subject to the supervision of the three bodies to which I have drawn attention. I gather that there are regular meetings with the Bank at a high level, chaired by the Treasury.
It is also claimed that aspects of the legislation are perhaps more stringent than those which would be required by the Bank of England. This has only been suggested. I hope the Minister will tell the House in which areas they are more stringent. I do not believe that the competition about which I have talked should be one-sided. When we say there should be fair and even competition, this does not mean fair competition only in the private sector. It should also be fair and even for the public sector.
If the House was persuaded to accept this amendment, aspects of legislation already on the statute book would have to be altered in such a way that ministerial control was no greater than for other nationalised industries. The special limitations, hinted at by the Treasury Minister, would have to be abolished so that limits on operations were equal. I believe that this would be accepted by those running the National Giro. They would wish that to happen.
I hope the Minister will not argue that the National Giro is not in competition with the rest of the banking sector. I have a number of most attractively produced publicity leaflets, one concerned with weekly payments and another with monthly payments relating to loan possibilities by the Giro. They are equally as well, if not better, produced as those of many financial institutions, perhaps because the Giro is not so staid and has paid more attention to public presenta-

tion than is usually the case among many of the more stuffy financial bodies in the City of London. If the Giro is to be a competitive body, it should compete equally and should be controlled by the Bank.

Mr. Roger Moate: I should be grateful for the advice of my hon. Friend. If the Giro is advertising in a more adventurous spirit than other financial institutions, does not this emphasise the importance of its being brought within the control of the advertising deposit regulations to which all other banking institutions are subject? Why should the Giro be in a privileged position?

Mr. Emery: I would not suggest that any of this advertising goes outside the advertising control provisions which we envisage would be set up by the regulations in the Bill. If our amendment were carried, it would ensure that the Giro had to comply with all aspects of the Bill and not simply in the matter of its supervision.
I want to make some remarks about the deposit protection fund. Much play was made on Second Reading about the need for the National Giro to contribute to the fund which would be set up. The Government have made clear that they would regard as uncompetitive any contribution that was made. The Minister has announced that the contribution will be made to the Treasury, not to the fund. I do not want to argue about whether or not there should be a fund. If there is to be a fund, the Giro should contribute just as much as any of the joint stock banks.
I base that argument to some extent on a question which I put to the Minister of State on Second Reading to which I never received a reply. I said:
I immediately have to ask whether the Government expect that the joint stock banks or the clearing banks will ever have to draw on the fund.
I did not receive an answer and, therefore, I answered the question myself. I said:
Of course they do not." [Official Report. 23 November 1978; Vol. 958, c. 1541.]
It is argued that the Giro need not contribute to the fund because it has a Government guarantee and would never have to draw on it. But that argument applies equally to the joint stock banks, which will not have to draw on the fund.
I reject absolutely the argument that the Giro's creation puts it in a specialist position. It should not be in that position. Everyone in the financial world would welcome its being brought under the Bill as a normal financial institution. If the Giro is to be encouraged to expand its banking services, increase its deposits and attract more new commercial business, it should be under the same controls and supervision as a joint stock bank.
I hope that the Minister will not suggest that the amendment is incomplete because the proper title should be National Giro-bank. We could put that right later. The intention is to bring the Giro under the Bill. I hope that the amendment will be supported by my hon. Friends. It should be supported by the Government and those who know the Giro because it would assist the Giro and be fair to both nationalised and private industry.

Mr. Wrigglesworth: The hon. Member for Honiton (Mr. Emery) has made slightly heavy weather of the argument on behalf of the clearing banks, which want this exclusion removed. He and they should study the National Giro's position more closely. There is no party political difference here. This is a simple practical point about the Giro's position as part of the Post Office and the relationship between such a public body and its sponsoring Government Department. There would have been an anomaly if the Giro had not contributed to the deposit protection fund, but that problem has been overcome by its making an equivalent contribution to the Treasury.
As was said in Committee, the National Giro is not a separate bank, like those constituted in the City, with its own board of directors and corporate entity. It is a division of the Post Office. That is why its accounts appear as they do, and they give just as much information. The hon. Member should discuss this matter with the accountants of the Giro and study its more recent accounts.
It is difficult to see how the Giro could at this stage operate otherwise than as part of the Post Office, because it relies so much on Post Office services and counters. It is impossible for it to have the same relationship with the Bank of England for supervision purposes as other

banking institutions. As part of the Post Office, it must be responsible to the Department of Industry and the Treasury as well as to the Bank of England.
5.45 p.m.
As I said in Committee, and as the hon. Gentleman himself has said, in an ideal world the National Giro would prefer things to be otherwise and to be responsible to one body rather than three. But it is part of the Post Office, which, as a State enterprise, has a relationship with a sponsoring Department. The exclusion therefore follows.
I was impressed by the willingness of the hon. Member to give freedom to the Giro. His view was not mirrored by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who said that he wanted much stricter control of the public sector than of the private. That is the philosophy that the Conservative Party has practised in power—no more so than in relation to the Giro. The former Member for Chichester, Mr. Christopher Chataway, pawed all over the Giro and considerably restricted its growth when he was Minister of Posts and Telecommunications during the last Conservative Government. He restricted its activities and set un a joint working party and an investigation of its future which lasted well over a year. He was never off the Giro's back.
I welcome the approach of the hon. Member for Honiton to the relationship between Government and a public enterprise. Should the Opposition ever become the Government—I do not think they will—I hope that his advice will be followed not only about the Giro but about other State enterprises.
There is a distinction here. The trustee savings banks come into the same category as others covered by the Bill. They are separate entities dealing entirely with banking operations, not a part of a postal service or of an organisation running the country's telecommunications, with massive investment in such things as submarine cables and satellites. They can therefore have a relationship with the Bank of England.
I hope that the amendment will not be pressed. On practical grounds, if the Opposition were the Government they would realise that it could not operate and that the Government must maintain their


relationship with the Post Office as it is today and as it was under previous Conservative Administrations.

Mr. John Moore: I congratulate my hon. Friend the Member for Honiton (Mr. Emery) on the excellent way in which he moved the amendment. I suggest to the hon. Member for Thornaby (Mr. Wrigglesworth) that there is a degree of confusion between the two sides of the House which is unnecessary. Our objectives are basically similar.
There are two basic objectives to take into account when we are discussing the National Giro. We all want to see adequate supervision of Giro. Our difficulty involves the different kinds of supervision rather than whether we should have supervision. We all want Giro to compete fairly in the public market place. My hon. Friend the Member for Honiton mentioned this, but it is not well enough seized by the Government.
It is important to glance briefly at the character of some of the problems associated with a national institution such as the National Giro as opposed to a commercial institution which is owned by investors and private individuals. There are a series of different types of problems which create the need for different types of supervision.
The fact that an institution is national can and does create in the minds of the public and in the minds of depositors a spurious sense of respectability. I do not suggest that that is not merited by Giro. But a semi-Government institution creates an illusion which makes us consider the necessity of providing additional protections rather than less secure protections for depositors who might be attracted by such an institution because of its national character.
Such a national institution uses public money, and therefore different kinds of responsibility and supervision are required. I emphasise the words "different kinds" as opposed to the essential thrust of the legislation which is to provide protection specifically for depositors.
A national institution legitimately can have different objectives from those of similar, competing commercial institutions. Let us imagine, for example, that the National Giro seeks to provide a cheaper form of deposit system. That

might be a legitimate aim and it might not be more risky. But there could, in the eyes of those seeking to defend depositors, be that correlation. I do not put it any higher than that.
The next point was touched upon by my hon. Friend the Member for Honiton. It concerns the difficulties that arise in remunerating or rewarding those who serve in responsible positions in national institutions that are not equity-run and where there is no opportunity to reward people beyond their remuneration. That could create a situation similar to that about which we are hearing in the Crown Agents tribunal. It is difficult to create a sense of equity remuneration as opposed to monetary remuneration for a national organisation. Those are some of the features of the problems that are associated with a national organisation which may not be experienced by a commercial, equity-based organisation.
We must also consider the non-contribution of an organisation such as Giro to the fund and the impact of that on commercial competitors. The hon. Member for Thornaby said in Committee that Giro must be happier in the commercial market place. But he must recognise that commercial institutions cannot feel on all fours with the National Giro when they believe that that organisation is not contributing equally to the fund and that it is not experiencing the same disciplines and controls.
Another small but related matter is that if the National Giro does not contribute to the initial fund, that will create disadvantages for other commercial organisations when there is a call on the fund.
We are making heavy weather of the issues. The solution is clear. We need two kinds of supervision. First, we need supervision for the protection of depositors. In other words, we want to bring the Giro within the scope of the Bill and under the control of the Bank of England which is charged with protecting depositors. We must also ensure that Giro contributes proportionally to the fund.
Secondly, we need a different type of supervision. I accept the Minister of State's comments in Committee. We must have the supervision of the Treasury and the Department of Industry in the light of the use by the National Giro of public


moneys. I am talking of a different type of supervision. Such a dual responsibility is not confusing. It is necessary in the light of the differing supervisory needs.
I commend the amendment to the House. It represents an important opportunity to help the National Giro and, at the same time, to help the commercial institutions with which it rightly seeks to compete on all fours.

Mr. Ridley: I declare an interest as a director of a bank. I do not think that that interest conflicts with anything in the amendment or anything that I wish to say.
This is my first contribution to the Bill. My experience as director of a bank has led me to be humble about the difficulties of supervision and control of banking institutions and to have less faith than the Government and some hon. Members seem to have that merely passing a Bill to control banking will result in profitable and successful banking ventures in the public and private sectors.
My heart is not with my hon. Friends when they call for fair competition between private banks and the National Giro. I do not believe that that concept can be sustained. There was fair competition between National Giro and the rest of the banking system from the beginning of Giro. What happened? The National Giro lost about £7 million a year in the early 1970s. Finally it accumulated a deficit of £33·4 million, which was written off with State funds. It proceeded to have appallingly bad results. It managed to scratch up a profit of £400,000, which, after it had paid its dividend, became a £900,000 loss. No private sector bank could get away with that performance.
I admire my hon. Friend the Member for Honiton (Mr. Emery) and agree with his general view. But I do not agree with him about this. If Giro had been a private bank, it would have gone out of business long ago.

Mr. Emery: My hon. Friend is reinforcing my argument. The postal service represents a major part of the loss which he quoted. That does not alter the main force behind the argument that Bank of England supervision would ensure that no private body could continue to operate

with such losses. The Giro would never have been allowed to build up a £34 million loss if it had been supervised by the Bank of England. That is why I say that supervision should be removed from the Government and given to the Bank. Government supervision in the past has been inadequate.

6.0 p.m.

Mr. Ridley: I shall come to my hon. Friend's main point, but let me deal first with the subsidiary point concerning postal services. I understand that there is a close connection between the Giro and the Post Office. I do not understand why the Giro cannot pay the Post Office for the Post Office services that it uses, or why the Post Office should not pay the Giro for the services it receives. The transaction could be carried out at arm's length. Any bank in the country probably spends hundreds of thousands of pounds on postal services, but there is no difficulty about any such bank paying the charges imposed by the Post Office. There is no reason why the Giro should be anything to do with the Post Office. The sooner it is not, the better.

Mr. Wrigglesworth: The Giro may go down that line, but the hon. Gentleman should read the accounts more carefully. If he were to do so he would find that Giro pays for all the postal services, counter services and all the other aspects of postal business that it uses. He would find, in addition, that the Giro has made a profit in each of the last three years.

Mr. Ridley: I would hate to read the accounts more carefully. I dread to think what horrible creatures would emerge from a close study of those accounts. It is time that the Comptroller and Auditor General went into those accounts with a fine tooth comb. At least the Government have grudgingly given us the point that the Comptroller is able to look into them.
The time is long since past when we should have had a standard of public audit from nationalised industries such as this, with a code of practice. The cheating, fiddling and fooling that are permitted in the public sector because the public sector is so dominant over its auditors frighten me very much.
That brings me to the main point raised by my hon. Friend the Member


for Honiton. It was that Bank of England supervision would avoid all this trouble. But what about the Crown Agents?

Mr. E. Fernyhough: What about the secondary banks? They were bailed out by the Bank of England.

Mr. Ridley: The right hon. Gentleman cannot have been listening to my speech. I said that the secondary banks went bust. If only the Giro had gone bust we would not have been having this silly debate this afternoon. The answer is that the Giro should have gone bust, just like London and County and all the other fringe banks that went bust. There is no way of securing full and fair competition if Giro cannot go bust when it deserves to.
I come back to the question of Treasury and Bank of England supervision. It was under that supervision, as well as the supervision of the Ministry of Overseas Development, that the Crown Agents were able to lose about £220 million in secondary banking and property ventures. There was a certain degree of supervision after a few years. The various authorities that supervised the Crown Agents were unhappy that the Crown Agents had made all those investments but said that because they were such good investments there was no real need to worry about them.
Leaving out of account the constitutional question of whether the Crown Agents were entitled to make those investments, those who supervised the Crown Agents were on the whole not worried about their investments because they were in marvellous concerns such as that of Mr. William Stern and many other characters who have since departed from the financial scene. So I have no great faith in Bank of England supervision, and I say that out of personal knowledge.
When one tries to supervise investments and loans made by a bank, the picture at the time the investments and loans are made is different from the picture when the concern crashes. It takes a man of great skill, not to say genius, to know that a concern which appears to be healthy when a loan is made to it will turn out to be a complete dud. That supervision is one for the directors to exercise. The responsibility should be placed

upon their heads, and if they fail it is they who should pay the penalty. That is what happens in the private sector.
The worst casualties of the secondary banking crash were the directors of the secondary banks. But with Giro and the Crown Agents only the taxpayer loses any money. No individual whose responsibility for supervision had been found wanting personally lost a penny.
I have difficulty about the whole subject of whether Giro should be included in the Bill. I think that it is a bad Bill, and I think that we should not have a Giro. Therefore, I find it difficult to give a view on whether something that I do not believe should exist should be subject to a supervision and control which I do not think we should have. That difficult question may take me some time to resolve this afternoon.
The only way to supervise and control the activities of banks is to have in charge of them people who are so committed, either in terms of their own money or that of their shareholders, and that they take the necessary great care and skill to control loans. I am humble about how difficult that is. I do not believe that by examining quarterly returns or by asking a few questions at the year end one succeeds by one iota in helping those who are in charge of banks. I do not believe that supervision of the Giro will stop it from losing another £33 million of public money in due course. With inflation, the figure will probably be higher next time.
I am, therefore, not happy for the Giro to continue as it is. There are two alternatives. One is to close it down. The other is to denationalise it. Both seem excellent ways of supervising it. I would like to see the Giro either closed down or passed into the private sector by a gradual transfer of its shares or by outright sale. If either of those alternatives were adopted, at least Giro would be suitable for supervision under the mechanisms in the Bill. It would be right to add it to the contributors to the fund because it would be liable to accept contributions from the fund should it get into trouble and its depositors face loss.
There is, therefore, an argument in favour of the amendment. If and when somethting is done about Giro, as it certainly will have to be, at least by putting


Giro into the Bill it could be supervised along with the other banks. We are burying our heads in the sand if we believe that Giro will go on and not lose another packet pretty quickly. There is therefore a case for including Giro in the Bill.
I often wonder why Labour Members are so keen about Giro and why the hon. Member for Thornaby (Mr. Wriggles-worth) rose to make a minor defence of it. He even interrupted me to say that it had made a profit in the last three years. With the £20 million investment income on the Government stocks that it has been given, I am not surprised that it made a tiny profit. The profit is totally and utterly inadequate to build up reserves against a had period in future. Labour Members do not examine what is the nature of banking. They do not understand its function in the industrial process. They do not begin to consider whether this is the right way to provide banking services. It is simply that the private sector has banks which are grand, important, powerful things—rich things.
The public sector did not have a bank. Like little boys at school, it asked "Why can't we have a public bank, just like the private sector has its banks?" Out of that desire there was set up this monster. However, no one is responsible for the conduct of this monster. When it next puts its hands into the taxpayers' pockets, which it undoubtedly will do at some stage or other, the public sector will merely say that the loss was due to the oil crisis or the failure of the anchovy crop off the coast of Patagonia, in which the Giro had invested heavily, or that it was blown off course, or something of that sort. But it will not go bust. It will not mean that some man loses his reputation and his fortune in the process. There is no one there who feels that he is remotely at risk.
The whole point of banking is that a person should be at risk so as to concentrate his mind upon the importance of making the right decisions. We have this problem with the Giro. On balance, my hon. Friends are right to seek to put this provision into the Bill. I hone that at least the Minister will agree that the regulations about advertisements and about the general way in which banks behave in our society should apply

equally to the Giro as they will apply to the other banks. There is something extremely obnoxious about saying that, because it is a public sector institution, it will never cross the mind of the Giro to do anything which is unethical in terms of its accounts, its advertisements or the way that it attracts customers and depositors.
This type of approach does the public sector great harm. If it is necessary to control the advertisements of banks, it seems that this control must apply equally to the Giro. That is desirable because ultimately we shall have to do something about the Giro. I know that Labour Members wash their hands of the events that have occurred, whether they concern the Crown Agents or Giro. Such institutions are always bailed out.
We must think not about deposit protection but about taxpayer protection. The need for such protection in relation to the Giro is such that anything that we can do to help will be an improvement. My dilemma in not being able to see how to deal with an organisation which I think should not exist in relation to a Bill which I do not believe should have been given a Second Reading is unresolvable. I therefore propose to vote with my hon. Friends and I hope that the vote will do something to impede the progress of the Giro.

Mr. Moate: Unlike my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), I cannot declare an interest. I only wish that I were a director of a bank, or even a shareholder. I do not even aspire to having an account with the National Giro. I agree with a great deal of what my hon. Friend said, but I have to disagree with some of his more fundamental points. I was happy that he came to the conclusion which I have reached, namely, that this is an amendment which ought, in present circumstances, to be supported.
Where I disagreed with my hon. Friend was in his general strictures concerning the very existence of the Giro. In the early days of the Giro, the losses which it incurred were certainly alarming and rightly gave cause for a fundamental examination of its right to exist. When discussion took place about the proposition that it should be abolished, it seemed that that was the wrong proposition. It was providing a valuable service. A


large number of people for whom the joint stock banks—the clearing banks—were not providing a service were being helped by the Giro. I was particularly involved in one scheme involving the payment of a large number of small amounts of money. It seemed to be essential in such circumstances that individuals should be able to cash their cheques at post offices. It was the only way that working people could cash cheques on, say, a Saturday afternoon.
6.15 p.m.
This led me to the view that the Giro was fulfilling a valuable service. Nevertheless, it must pay its way. I felt that it had to be placed on a proper basis, under proper economic and financial disciplines. Inevitably the situation in the past led to the result my hon. Friend has described, when millions of pounds were lost per year, with an eventual write-off of £34 million. I share my hon. Friend's fear that this will happen again. I would have limited the activities of the Giro to what I would describe as post office services. It has gone much further. It has set itself up as a competitor of the banks. It offers personal loans and provides overdrafts. It can provide loans to local authorities and nationalised industries. It can issue credit cards, supply bridging loans, and the like. It is fundamental that, if the Giro wishes to present itself to the people as a banking institution, it ought not to resist the proposition that it should subscribe to the same rules and be subject to the same regulations as the other major banks.
I would have thought that the Giro would welcome the idea that it should be given the same status as the clearing banks in the eyes of the law. It surprises me that the Government seem to be making heavy weather of this proposition. I thought that the hon. Member for Thornaby (Mr. Wrigglesworth) was about to put forward a powerful defence of the Government's resistance of this amendment. What reason did he give? His reason was basically that there was no objection in principle—it was just that it would be difficult in practice. There was a practical objection. What was that practical objection? It was to do with the close connection of the Giro with the Post Office. I do not see that as a practical objection. While it may be undesir-

able to serve more than one master—to be responsible to the Post Office and then to the Department concerned and to the Treasury as well as this other institution which will supervise banks—it is certainly not impractical.
It is only fair that the Giro should be so regulated. It is feasible that the Giro could be so included and could conform with the rules and regulations. I am sure that, given the will, the Minister could quickly find a way of ensuring that the Giro was subject to these rules and came within the ambit of the Bill. There is no fundamental problem about that.
What I suggest is that the closeness of the Giro with the Post Office makes it desirable that we should make further demands of the Giro. It is its close connection with the Post Office which makes it more important, not less, that it should be seen to be competing fairly with the other banking institutions. By resisting its inclusion in the Bill, the Government are blurring further the edges of this nationalised banking body.
I wish further to develop this point about the closeness of the connection between the Giro and the Post Office. My hon. Friend the Member for Cirencester and Tewkesbury rightly said that what we are concerned with here is not the protection of the depositor but the protection of the taxpayer.
Obviously, there has been some confusion already about the nature of the profits or losses which the National Giro is making. How extraordinary it is that the accounts of a banking institution of this kind should not be absolutely clear. How can that be so? The answer lies in the closeness of connection with the Post Office, with all the possibilities of cross-subsidy between one Department and another.
How do we know whether Giro is making a profit or a loss? How do the employees and the senior executives of the National Giro know whether they are operating under proper financial disciplines, whether they are taking too great a risk or too little a risk in a particular loan, and so on? They are not subject to the same risks themselves—certainly not the same risks in their employment as would be faced by an employee in the private sector. Their jobs are not at stake. The shareholders' money is not


at stake. What is at stake, perhaps, is Post Office money, and there is a possibility of Post Office funds being used in some way, perhaps through the reduction of hidden overheads, which would amount to a form of subsidy to Giro.
We do not know, and we shall not know, unless we have a far better view of the National Giro accounts and much clearer accounting than we have now. We cannot know whether the National Giro is truly competing with the banks, bearing all the overheads which it should bear and making the sort of profit or return which it should on the taxpayers' capital.
Even if the Government do not concede the amendment, or it is not carried by the House, the least we are entitled to is much clearer accounting and a clear separation of the accounts of the National Giro so that, if it has banking pretensions, one can see whether it conforms to our banking standards and requirements.
I go further and say that the National Giro ought to welcome the case which we are making from the Opposition Benches. If the National Giro seeks to perform the wide-ranging activity which it is empowered to engage in, and if it aspires to that sort of status, it should be kept more apart from the Post Office. It should show separate accounts. It should be separately capitalised, and it should be separately accountable to the House. It should be separately examined by the Comptroller and Auditor General. By that I am not suggesting denationalisation. I am saying merely that it should stand on its own and be separately accountable.
If, however, the National Giro were separately accountable and if it were successful and profitable, there might be a case for allowing it to have a part-equity taken up by the private sector. Perhaps that would be right, and one might have, so to speak, a BP-type solution, with part-public and part-private equity. At the initial stage, however, it should be kept separate and be separately accountable.
As I say, I should have expected the National Giro to welcome that proposition. I should expect the Government to welcome it, too. If they were to accept

the inclusion of the National Giro in the Bill, the Government would be giving the National Girobank that extra status in meeting all our banking requirements. Presumably, that would be a commercial attraction to Giro. It could then say to potential depositors and its customers "We have full bank status, and we conform to all the banking standards laid down in the Government's new Bill." Surely, that could be only to its advantage, and I fail to understand why the Government resist it.
I come now to the question of fairness in competition. I am coming to the Bill afresh, as it were. I was not privileged to be on the Standing Committee, if "privileged" be the right word. As I look at part III, I cannot understand why all other banks should be subject to fairly stringent, or potentially stringent, control over advertisements whereas the National Giro should not be so regulated and controlled.
My hon. Friend the Member for Honiton (Mr. Emery) produced a pamphlet and said—I am recalling his words—that it was a very good pamphlet and rather more adventurous and inviting than, perhaps, some of the advertisements used by the rather more staid banking organisations. He was not criticising it on those grounds. I took him to be commending it, and so would I.
I do not suggest that banking advertisements should not be adventurous and inviting to the depositor, but, if the banks are to be controlled in their advertisements, why should not the National Giro be similarly controlled? It seems to me that the point is so self-evident that even hon. Members on the Government Benches should agree. The National Giro should be on the same basis as all the other banks, and in regard to advertisements in particular it should follow exactly the same lines—and be seen to follow exactly the same lines—being subject to the same rules and regulations. I regard that as fundamental.
Finally, I come to the question of the compensation fund. I understand that the Government have, in effect, conceded the principle and accepted that it would be unfair if the National Giro were not to make a payment equal to the contribution which it would have to pay to the deposit protection fund if it were included


in the Bill. It seems strange to concede the principle in that way and then to say that the Treasury will receive a payment from the Giro equal to the amount which would otherwise have been paid into the fund, since, as I understand it, that will be of no benefit to the fund. It might be of benefit to the taxpayer, but it will be of no benefit to the other banks which will have to contribute to the fund in the event of a call upon it.
That arrangement reminds me of the procedure for contracting out of the political levy in the trade union movement. Where there is any question of a closed shop, in certain circumstances it is conceded that a worker need not join the union but must make a payment to charity equal to the amount of trade union dues. In this case, the National Giro is to be allowed to contract out and make its equal contribution to the Treasury, corresponding, presumably, to the contribution to charity in the trade union analogy which I have drawn.
That is an illogical proposition because the National Giro, which is being heavily supported, or has been heavily supported, by the taxpayer is now to make a small contribution, probably a pitiful contribution, back to the Exchequer—to the Exchequer of all people—when that contribution should be paid to the fund, just for the sake of some spurious equity which the Government are trying to introduce into the system. In my view, it should be part of the fund or not be part of the fund—one way or the other. It would be part of the fund through the inclusion of the National Giro in the Bill.
I congratulate my hon. Friend the Member for Honiton on his introduction of the amendment. I hope that the Minister has been persuaded by our arguments and will accept the logic of the case. I ask the House to decide that the National Giro should be subject to the same rules and regulations as those governing other banking institutions and should be covered by the Bill.

The Minister of State, Treasury (Mr. Denzil Davies): The debate has, in effect, been about whether the National Giro, as the hon. Member for Faversham (Mr. Moate) has just put it, should be subject to the same rules and regulations as those governing all other financial institutions. As I said in Committee, the answer is that

it is now subject to all the same rules and regulations as those governing other financial institutions. It is supervised certainly as stringently as, and perhaps even more stringently than, private commercial banks are at the moment. It is supervised by the Treasury and the Bank of England. Ultimate responsibility to the House lies with the Department of Industry, but the regulation and supervision is carried out by the Treasury and the Bank of England, although, as I say, the constitutional position is that the Department of Industry has ultimate responsibility for the Post Office.
The hon. Member for Honiton (Mr. Emery) said that, where a public body is competing, the rules ought to be the same. I accept that entirely. I accepted it in Committee, and I accept it now. The rules are the same. In fact, the restrictions on Giro are greater. I am not talking necessarily about supervision here, but on what it can do and how it can go out and compete for deposits the restrictions are greater than those upon a normal private sector commercial bank.
At that point in the speech of the hon. Member for Honiton the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), speaking from a sedentary position, said "Much more". Indeed, although I do not accept what the hon. Gentleman says about the public sector or about Giro, if one argues from his premise, yes, indeed, there is much more supervision and regulation. The National Giro is subject to more stringent rules than is the private sector.

Mr. Ridley: What happens if Giro loses £34 million? Who suffers? Who pays up? Who loses his job?

Mr. Davies: That is a separate point, and I shall come to it in a moment. Behind some of his cynicism, if I may say so, with respect, the hon. Gentleman made a good speech. The hon. Gentleman's conclusion did not follow his argument. However, the vote was nearing and he had to square his argument with party loyalty. He did not do himself justice by drawing such a conclusion. To some extent I agree with his analysis.
6.30 p.m.
The hon. Member for Honiton introduced the amendment reasonably and in


a reasoned manner. He went so far as to say that Giro should be allowed to compete on all fours with the private sector and that the restrictions should be lifted. I shall bear that in mind. From time to time we consider the deposit-taking restrictions placed upon Giro. I understand that if a person does not have a current account he or she cannot have a deposit account. We shall consider the restrictions and consider whether we should put Giro on all fours with the private commercial banks.
I accept the hon. Gentleman's remarks about the difficulty of supervising banks. It is a difficult operation. There is no perfection. Other countries have realised that. However, we must try to make the effort. That is what the Bank of England will do when the Bill is enacted.
Giro competes with the private sector, but it is not necessarily on all fours with it. That is because the restrictions on Giro are greater than those on other banks. There is no advantage to Giro from being outside the deposit protection supervisory provisions. The hon. Member for Faversham thinks that Giro would wish to be included. It probably would. It probably would not object to the effect of the amendment. I do not think that it would object to being included in private sector supervision. Indeed, inclusion might enhance its reputation. In resisting the amendment, there is no question that we are conforming to the wishes of Giro. It is possible that we are doing the very opposite.
The hon. Member for Cirencester and Tewkesbury said that we should liquidate Giro or sell it off to the private sector. There lies a dilemma. We are not liquidating it and we are not selling it off to the private sector. We are talking about a public sector bank. The hon. Gentleman asked who will bear the risk if the money is lost. He said that the risk will not be borne by the directors or those who work for Giro. At the end of the day the risk, if that is the right word, lies with Ministers. The risk lies with Ministers, who are responsible to the House, when public money and a public body are involved. That may be an imperfect responsibility. It may be that we need better rules. The system is imperfect and we recognise the limitations, but ultimately responsibility for a public sec-

tor body and public sector money should lie with Ministers. That is the present position with Giro.
If we accepted the amendment, Giro would come into private sector supervision. It would become responsible to the Bank of England. Under the Bill the Bank of England is responsible in a different way. It is responsible for the whole operation of its supervision, not necessarily the way in which it supervises each institution. That is why I cannot accept the amendment.
It may be rather old-fashioned to say that ultimately responsibility for public money should lie at the Dispatch Box. That is the only real reason why the Government resist the amendment. I do not say that there are great practical difficulties. The difficulties could be resolved. It may be a small constitutional argument, but by putting Giro into the supervisory system that we have designed for private commercial institutions we are removing it from public sector accountability to a great extent. I believe that responsibility should lie with Ministers through Government Departments.

Mr. Moate: Surely, if Giro is included and made accountable to the Bank of England, that does not reduce the accountability of Ministers for the profits, losses or operations of Giro.

Mr. Davies: The hon. Gentleman is saying that total supervision of Giro should lie with the Bank of England and that Treasury Ministers, who have no say in that supervision, should still be responsible to the House. That is crazy. I happen to believe that nationalised industries are not sufficiently accountable to the House. The way in which they were set up did not permit that responsibility. I should have preferred a closer responsibility.
Opposition Members are saying that public money is involved and that they are afraid of losses. Over the past few years the figures have been good, but they are saying that they are afraid of losses and that Giro, despite the fact that public money is involved, should be pushed further into the private sector and its responsibility to the House diminished. That is why I said that the conclusion of the hon. Member for Cirencester and Tewkesbury did not follow the analysis that he drew. In view of his remarks,


it seems that he will not be able to support the amendment.
I advanced the same argument in Committee. It is the real reason for resisting the amendment. I do not believe that some other reasons that have been mentioned are conclusive. Surely it is only right at the end of the day that a public sector body and a public sector bank should be supervised and examined through a Government Department and through Ministers and made accountable to the House. That is why I advise the House to reject the amendment.

Mr. Ian Stewart: Before I turn to the subject matter of this interesting debate about the status of Giro, I wish to make a declaration and a reference outside the debate.
First, I declare an interest. I remind the House, as I said on Second Reading and in Committee, that I am a director of Brown Shipley and Co. Ltd., a merchant bank and a member of the Accepting Houses Committee.
Secondly—my reference may strictly be out of order, but I hope that I shall be allowed to make it—as we are dealing with Treasury business it is right to think for a moment of the memory of a former Chancellor of the Exchequer. I refer to the sad death of Mr. Reginald Maudling. I did not come to know him well until the last year or two when my wife went to work with Mrs. Maudling on the Westminster Hospital Research Trust. During that time I came to know him and his wife well. He must have been one of the nicest and most able Members that the House has had for a long time. Many of us feel deeply for Mrs. Maudling at this sad time.
We have had an interesting debate about the status of Giro. We had similar debates on Second Reading and in Committee. The debate hinges on the measure of importance of the difference in emphasis of the two sides of the House. My hon. Friend the Member for Honiton (Mr. Emery) moved the amendment with his usual eloquence. My hon. Friend put the case satisfactorily. We are concerned with how to define the boundary between the public and private sectors of the economy.
In a mixed economy such as ours there is bound to be a substantial public sector element. Some of my hon. Friends—

my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) expressed his own feelings—think that it would be better if there were not a public sector and if a body such as Giro did not exist. However, dealing with matters as they are, there are a number of public bodies in industry and in the financial sector that are competing with their counterparts in the private sector. The burden of our argument is that, when that is the position, the public sector companies and the private sector companies should, as far as is possible, be placed on all fours. We say that that should apply, not only in formal legislation but in administrative procedures and commercial practice. We say that when there is direct competition there should be a fair balance.
I have no hostility to Giro. If it were to receive exactly the same treatment and not the compromise that the Government wish, that might be to its advantage. I was not surprised when the Minister said that Giro might welcome being brought on all fours with its private sector counterparts. That point was also made by my hon. Friend the Member for Faversham (Mr. Moate).
There are two main elements in parity between Giro and the private sector banks. The first is the deposit protection fund. The Government have fairly recognised that it would be wrong for Giro not to bear a cost equivalent to that borne by private sector banks that under the new arrangements in the Bill will make contributions to the deposit protection fund. For that purpose they have arranged that the Giro shall pay a sum equivalent to what its contribution would have been had it been a member of the fund, but that it shall be paid to the Treasury instead. This is not to put the Giro on exactly the same footing. The size of the fund is affected. If the Giro had been making contributions to the fund, then, relatively speaking, although it may be by a small amount, the other participants in the fund would not have had to contribute so much.
My hon. Friend the Member for Honition put again the question that he asked on Second Reading—that is, whether the Government seriously thought that the deposits of the clearing banks were likely to be at risk. The clearing banks have to put up two-thirds of the total


amount of money in the protection fund. While the clearing banks and other recognised banks and other licensed deposit-taking institutions will be making contributions to the fund—and will thus in a sense be subsidising the activity of the riskier institutions at the cost of the saver—the Giro will not be part of those arrangements. If there are defaults, and payments are made out of the fund, it will in the first instance be for the banks in the private sector to meet that deficiency.
The other area of difficulty that we have had all through our discussions concerns supervision. It is true, as the Minister has said this afternoon—and as he explained at greater length in Committee—that there are arrangements between the Post Office and the Treasury to determine the various ratios which apply in the conduct of the Giro banking business. There are also agreements about the classes of business which it can undertake. There is, therefore, a sort of tripartite responsibility for the Giro on the part of the Bank of England, the Treasury and the Department of Industry. That is right, because the Giro depends on the Treasury for its capital. It is right that the Giro should be accountable, in that sense, through Ministers to the House of Commons. But all this seems to me to turn on the interpretation of the word "supervision". After all, when the Bank of England supervises banks in the private sector, it does not control their policy, it does not organise the business which they can do. and it does not exert a proprietary control over the business of those banks.
I am a director of a bank which is a subsidiary of a holding company, which has a separate board of directors and which is responsible to the shareholders. That bank is run as a result of decisions taken in the broadest terms by shareholders, through the articles of association of the company, through the holding company's board, and through the management of the bank itself. That is not supervision. That is management, control and operation. The bank, like many others, goes to the Bank of England for supervision of the nature of its balance sheet, its assets, its liabilities and so on.
What we are proposing in the amendment is that the supervisory function in relation to the Giro should be carried out by the Bank of England in exactly the same way as it is carried out now for literally hundreds of banks in the private sector. It is not quite right, therefore, for the Minister to say that the same rules apply. They are in some ways equivalent rules, but they are not the same rules. It is on a small but important point that there is an issue of principle between us. There seems to be a mental block in the bureaucracy when these matters are looked at. Civil servants say, in effect, "We shall try to get everything in practice as nearly the same as possible, but we shall stop short of putting matters on all fours as between the public and the private sector."

6.45 p.m.

Mr. Emery: My hon. Friend was talking of the supervision of the management. The Minister suggested earlier that the supervision was as great as anything that could be expected in the private sector. I draw his attention to the report of Touche Ross and Company, the auditors of the Post Office accounts for 1976–77. The accounts are noted specifically in regard to the Giro, and note XIII states that
an acceptable level of control over Giro processing could not be maintained at all periods during the year".
The auditors go on to say that
Any errors arising are, in our opinion, unlikely materially to have affected the total of the Giro customer balances … at £188 million".
The auditors point out in note XIII that in
one of the five main areas of transaction processing
the control during parts of the year is "unacceptable".
If any bank had to note its accounts in that manner, it would be out of business. I suggest, therefore, that the stringency of the private sector is what the amendment requires of the Giro. Indeed, it strengthens the point—made so adequately by my hon. Friend—that I tried to make in my speech.

Mr. Stewart: My hon. Friend has made an interesting and important intervention. I am sure, however, that he would not expect me now to follow


through the implications of his remarks. I have no doubt that his words will not be lost on the Minister when he considers them.
It is a pity that the Government, having come so far in their proposals for the National Giro, have stopped short of bringing its supervision and its contribution to the funds exactly into line with

Division No.80]
AYES
[6.47 p.m.


Arnold, Tom
Hicks, Robert
Prior, Rt Hon James


Atkins, Rt Hon H. (Spelthorne)
Hodgson, Robin
Pym, Rt Hon Francis


Atkinson, David (B'mouth, East)
Holland, Philip
Rathbone, Tim


Baker, Kenneth
Hooson, Emlyn
Rees, Peter (Dover &amp; Deal)


Benyon, W.
Howell, David (Guildford)
Rees-Davies, W. R.


Berry, Hon Anthony
Hunt, David (Wirral)
Renton, Rt Hon Sir D. (Hunts)


Biffen, John
Hunt, John (Ravensbourne)
Rhodes James, R.


Biggs-Davison, John
Hurd, Douglas
Ridley, Hon Nicholas


Boscawen, Hon Robert
James, David
Ridsdale, Julian


Braine, Sir Bernard
Jessel, Toby
Rifkind, Malcolm


Brooke, Hon Peter
Johnston, Russell (Inverness)
Roberts, (Michael (Cardiff NW)


Brotherton, Michael
King, Evelyn (South Dorset)
Ross, Stephen (Isle of Wight)


Buck, Antony
Kitson, Sir Timothy
Rossi, Hugh (Hornsey)


Budgen, Nick
Knight, Mrs Jill
Rost, Peter (SE Derbyshire)


Clark, Alan (Plymouth, Sutton)
Knox, David
Sainsbury, Tim


Clark, William (Croydon S)
Le Merchant, Spencer
Shaw, Giles (Pudsey)


Clegg, Walter
Lester, Jim (Beeston)
Shelton, William (Streatham)


Cockcroft, John
Luce, Richard
Sims, Roger


Cope, John
McCrindle, Robert
Speed, Keith


Costain, A. P.
Macfarlane, Neil
Stainton, Keith


Crowder, F. P.
MacKay, Andrew (Stechford)
Stanbrook, Ivor


Douglas-Hamilton, Lord James
McNair-Wilson, M. (Newbury)
Stanley, John


Dunlop, John
Mather, Carol
Steel, Rt Hon David


Dykes, Hugh
Mawby, Ray
Steen, Anthony (Wavertree)


Eden, Rt Hon Sir John
Maxwell-Hyslop, Robin
Stewart, Ian (Hitchin)


Emery, Peter
Miller, Hal (Bromsgrove)
Stradling Thomas, J.


Eyre, Reginald
Mills, Peter
Taylor, Teddy (Cathcart)


Fairgrieve, Russell
Moate, Roger
Tebbit, Norman


Fisher, Sir Nigel
Monro, Hector
Temple-Morris, Peter


Fletcher, Alex (Edinburgh N)
Moore, John (Croydon C)
Townsend, Cyril D.


Fletcher, Ted (Darlington)
More, Jasper (Ludlow)
Viggers, Peter


Fowler, Norman (Sutton C'f'd)
Morgan, Geraint
Walker, Rt Hon P. (Worcester)


Freud, Clement
Morris, Michael (Northampton S)
Wall, Patrick


Fry, Peter
Nelson, Anthony
Weatherill, Bernard


Gardner, Edward (S Fylde)
Page, Rt Hon R. Graham (Crosby)
Whitney, Raymond


Gilmour, Rt Hon Sir Ian (Chesham)
Page, Richard (Workington)
Wiggin, Jerry


Glyn, Dr Alan
Paisley, Rev Ian
Winterton, Nicholas


Gow, Ian (Eastbourne)
Pardoe, John
Young, Sir G. (Ealing, Acton)


Gower, Sir Raymond (Barry)
Pattie, Geoffrey
Younger, Hon George


Grist, Ian
Penhaligon, David



Hall-Davis, A. G. F.
Percival, Ian
TELLERS FOR THE AYES:


Harvie Anderson, Rt Hon Miss
Prentice, Rt Hon Reg
Mr. John MacGregor and


Hawkins, Paul
Price, David (Eastleigh)
Mr. Peter Morrison.


Hayhoe, Barney






NOES


Allaun, Frank
Carmichael, Nell
Dormand, J. D.


Areher, Rt Hon Peter
Cartwright, John
Douglas-Mann, Bruce


Armstrong, Ernest
Clemitson, Ivor
Edge, Geoff


Ashley, Jack
Cocks, Rt Hon Michael (Bristol S)
Evans, John (Newton)


Ashton, Joe
Corbett, Robin
Fernyhough, Rt Hon E.


Atkins, Ronald (Preston N)
Cowans, Harry
Fletcher, Ted (Darlington)


Bagier, Gordon A. T.
Cox, Thomas (Tooting)
Foot, Rt Hon Michael


Bain, Mrs Margaret
Cralgen, Jim(Maryhill)
Ford, Ben


Bates, Alf
Crawford, Douglas
Freeson, Rt Hon Reginald


Bean, R. E.
Crawshaw, Richard
Gould, Bryan


Bishop, Rt Hon Edward
Crowther, Stan (Rotherham)
Grant, George (Morpeth)


Blenkinsop, Arthur
Cryer, Bob
Grant, John (Islington C)


Boardman, H.
Cunningham, Dr J. (Whlteh)
Grocott, Bruce


Boothroyd, Miss Betty
Davidson, Arthur
Hamilton, W. W (Central Fife)


Bray, Dr Jeremy
Davies, Bryan (Enfield N)
Harrison, Rt Hon Walter


Buchan, Norman
Davies, Rt Hon Denzil
Hayman, Mrs Helene


Buchanan, Richard
Davies, Ifor (Gower)
Heffer, Eric S.


Callaghan, Jim (Middleton &amp; P)
Deakins, Eric
Home Robertson, John


Campbell, Ian
Dempsey, James
Horam, John


Cant, R. B.
Doig, Peter
Hoyle, Doug (Nelson)

what they would be if it were part of the private sector, with which it will be competing. It is on the basis of that difference that I advise my right hon. and hon. Friends to support the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 126, Noes 140.

Division No.80]
AYES
[6.47 p.m.


Arnold, Tom
Hicks, Robert
Prior, Rt Hon James


Atkins, Rt Hon H. (Spelthorne)
Hodgson, Robin
Pym, Rt Hon Francis


Atkinson, David (B'mouth, East)
Holland, Philip
Rathbone, Tim


Baker, Kenneth
Hooson, Emlyn
Rees, Peter (Dover &amp; Deal)


Benyon, W.
Howell, David (Guildford)
Rees-Davies, W. R.


Berry, Hon Anthony
Hunt, David (Wirral)
Renton, Rt Hon Sir D. (Hunts)


Biffen, John
Hunt, John (Ravensbourne)
Rhodes James, R.


Biggs-Davison, John
Hurd, Douglas
Ridley, Hon Nicholas


Boscawen, Hon Robert
James, David
Ridsdale, Julian


Braine, Sir Bernard
Jessel, Toby
Rifkind, Malcolm


Brooke, Hon Peter
Johnston, Russell (Inverness)
Roberts, (Michael (Cardiff NW)


Brotherton, Michael
King, Evelyn (South Dorset)
Ross, Stephen (Isle of Wight)


Buck, Antony
Kitson, Sir Timothy
Rossi, Hugh (Hornsey)


Budgen, Nick
Knight, Mrs Jill
Rost, Peter (SE Derbyshire)


Clark, Alan (Plymouth, Sutton)
Knox, David
Sainsbury, Tim


Clark, William (Croydon S)
Le Merchant, Spencer
Shaw, Giles (Pudsey)


Clegg, Walter
Lester, Jim (Beeston)
Shelton, William (Streatham)


Cockcroft, John
Luce, Richard
Sims, Roger


Cope, John
McCrindle, Robert
Speed, Keith


Costain, A. P.
Macfarlane, Neil
Stainton, Keith


Crowder, F. P.
MacKay, Andrew (Stechford)
Stanbrook, Ivor


Douglas-Hamilton, Lord James
McNair-Wilson, M. (Newbury)
Stanley, John


Dunlop, John
Mather, Carol
Steel, Rt Hon David


Dykes, Hugh
Mawby, Ray
Steen, Anthony (Wavertree)


Eden, Rt Hon Sir John
Maxwell-Hyslop, Robin
Stewart, Ian (Hitchin)


Emery, Peter
Miller, Hal (Bromsgrove)
Stradling Thomas, J.


Eyre, Reginald
Mills, Peter
Taylor, Teddy (Cathcart)


Fairgrieve, Russell
Moate, Roger
Tebbit, Norman


Fisher, Sir Nigel
Monro, Hector
Temple-Morris, Peter


Fletcher, Alex (Edinburgh N)
Moore, John (Croydon C)
Townsend, Cyril D.


Fletcher, Ted (Darlington)
More, Jasper (Ludlow)
Viggers, Peter


Fowler, Norman (Sutton C'f'd)
Morgan, Geraint
Walker, Rt Hon P. (Worcester)


Freud, Clement
Morris, Michael (Northampton S)
Wall, Patrick


Fry, Peter
Nelson, Anthony
Weatherill, Bernard


Gardner, Edward (S Fylde)
Page, Rt Hon R. Graham (Crosby)
Whitney, Raymond


Gilmour, Rt Hon Sir Ian (Chesham)
Page, Richard (Workington)
Wiggin, Jerry


Glyn, Dr Alan
Paisley, Rev Ian
Winterton, Nicholas


Gow, Ian (Eastbourne)
Pardoe, John
Young, Sir G. (Ealing, Acton)


Gower, Sir Raymond (Barry)
Pattie, Geoffrey
Younger, Hon George


Grist, Ian
Penhaligon, David



Hall-Davis, A. G. F.
Percival, Ian
TELLERS FOR THE AYES:


Harvie Anderson, Rt Hon Miss
Prentice, Rt Hon Reg
Mr. John MacGregor and


Hawkins, Paul
Price, David (Eastleigh)
Mr. Peter Morrison.


Hayhoe, Barney






NOES


Allaun, Frank
Carmichael, Nell
Dormand, J. D.


Areher, Rt Hon Peter
Cartwright, John
Douglas-Mann, Bruce


Armstrong, Ernest
Clemitson, Ivor
Edge, Geoff


Ashley, Jack
Cocks, Rt Hon Michael (Bristol S)
Evans, John (Newton)


Ashton, Joe
Corbett, Robin
Fernyhough, Rt Hon E.


Atkins, Ronald (Preston N)
Cowans, Harry
Fletcher, Ted (Darlington)


Bagier, Gordon A. T.
Cox, Thomas (Tooting)
Foot, Rt Hon Michael


Bain, Mrs Margaret
Cralgen, Jim(Maryhill)
Ford, Ben


Bates, Alf
Crawford, Douglas
Freeson, Rt Hon Reginald


Bean, R. E.
Crawshaw, Richard
Gould, Bryan


Bishop, Rt Hon Edward
Crowther, Stan (Rotherham)
Grant, George (Morpeth)


Blenkinsop, Arthur
Cryer, Bob
Grant, John (Islington C)


Boardman, H.
Cunningham, Dr J. (Whlteh)
Grocott, Bruce


Boothroyd, Miss Betty
Davidson, Arthur
Hamilton, W. W (Central Fife)


Bray, Dr Jeremy
Davies, Bryan (Enfield N)
Harrison, Rt Hon Walter


Buchan, Norman
Davies, Rt Hon Denzil
Hayman, Mrs Helene


Buchanan, Richard
Davies, Ifor (Gower)
Heffer, Eric S.


Callaghan, Jim (Middleton &amp; P)
Deakins, Eric
Home Robertson, John


Campbell, Ian
Dempsey, James
Horam, John


Cant, R. B.
Doig, Peter
Hoyle, Doug (Nelson)




Hunter, Adam
Mellish, Rt Hon Robert
Stewart, Rt Hon M. (Fulham)


Irving, Rt Hon S. (Dartford)
Mikardo, Ian
Stoddart, David


Jay, Rt Hon Douglas
Milian, Rt Hon Bruce
Stott, Roger


Johnson, James (Hull West)
Molloy, William
Strang, Gavin


Jones, Dan (Burnley)
Morris, Rt Hon Charles R.
Summerskill, Hon Dr Shirley


Kerr, Russell
Morton, George
Taylor, Mrs Ann (Bolton W)


Lambie, David
Murray, Rt Hon Ronald King
Thomas, Jeffrey (Abertillery)


Lamborn, Harry
Newens, Stanley
Thomas, Ron (Bristol NW)


Lamond, James
Noble, Mike
Tierney, Sydney


Latham, Arthur (Paddington)
Orme, Rt Hon Stanley
Tinn, James


Leadbitter, Ted
Palmer, Arthur
Urwin, T. W.


Lewis, Ron (Carlisle)
Park, George
Wainwright, Edwin (Dearne V)


Litterick, Tom
Parker, John
Walker, Terry (Kingswood)


Lofthouse, Geoffrey
Radice, Giles
Watkins, David


Loyden, Eddie
Richardson, Miss Jo
Watkinson, John


Lyon, Alexander (York)
Roderick, Caerwyn
White, Frank R. (Bury)


McCartney, Hugh
Rodgers, George (Chorley)
White, James (Pollok)


McDonald, Dr Oonagh
Rodgers, Rt Hon William (Stockton)
Whitlock, William


McElhone, Frank
Rooker, J. W.
Wilson, Gordon (Dundee E)


Macfarquhar, Roderick
Ross, Rt Hon W. (Kilmarnock)
Wilson, William (Coventry SE)


McGuire, Michael (Ince)
Rowlands, Ted
Wise, Mrs Audrey


McKay, Allen (Penistone)
Shaw, Arnold (Ilford South)
Woof Robert


Maclennan, Robert
Silkin, Rt Hon John (Deptford)
Wrigglesworth, Ian


McMillan, Tom (Glasgow C)
Silverman, Julius
Young, David (Bolton E)


Madden. Max
Skinner, Dennis



Marks, Kenneth
Snape, Peter
TELLERS FOR THE NOES:


Marshall, Dr Edmund (Goole)
Spriggs, Leslie
Mr. James Hamilton and


Marshall, Jim (Leicester S)
Stewart, Pt Hon Donald
Mr.Ted Graham.

Question accordingly negatived.

Clause 6

GROUNDS FOR REVOCATION OF RECOGNITION OR LICENCE

Mr. Denzil Davies: I beg to move amendment no. 2, in page 2, line 6, at end insert—
'(ff) the institution is an unincorporated institution other than a partnership and is formed under the law of another member State and an event has occurred with respect to it which, in that member State, appears to the Bank to correspond, as near as may be, with any of the events specified in paragraphs (a) to (d) of subsection (2) or paragraphs (a) to (f) of subsection (3) below, or '.

Mr. Deputy Speaker (Sir Myer Galpern): With this it will be convenient to take Government amendment nos. 16, 17 and 18.

7.0 p.m.

Mr. Davies: These are technical amendments and they deal with the position of an unincorporated institution which is neither a partnership nor a company in relation to insolvency provisions. In the EEC, there are various organisations which do not fit very well into the partnership or corporate forms that we know in this country. It is necessary to provide for insolvency provisions in relation to them. That is why these amendments have been tabled. They are purely technical and relate mainly to institutions in France and Italy which are not

strictly either limited liability companies or partnerships.

Mr. John Moore: The Minister of State will recognise that the technical nature of the amendments does not exclude the degree to which they impinge on many other interrelated points. The right hon. Gentleman was kind enough to send all members of the Committee a crucial letter dated 12 February concerning certain undertakings given in Committee that impinge upon our present discussions.
I should like to raise several points relating to this series of technical amendments. My hon. Friend the Member for Hitchin (Mr. Stewart) raised three particular technical points in Committee. The first related to the difficult problem which might occur due to the interpretation of the word "deposits ". We were concerned about the possibility of an inadvertent triggering of the revocation provisions by a legitimate change in the nature of the bank's mix of business.
It is relevant to put on record the useful comments that the Minister of State made in that letter. He said:
The Bank will take all relevant circumstances into account in deciding whether to proceed with revocation on the grounds that an institution has not carried on a deposit-taking business (as defined) for six months or more, and the provision will be interpreted flexibly.
Secondly, my hon. Friend the Member for Hitchin raised the complicated question of the composition of creditors. The Minister thought that this was covered. I


am delighted that in his letter he was able to stress that he was
confident that there is no need to provide for revocation on the grounds of a composition with creditors in the case of companies. Section 206 of the Companies Act 1948, which I assume you had in mind"—
the right hon. Gentleman was referring to my hon. Friend the Member for Hitchin—
is generally directed towards reconstructions and amalgamations, where the company is to continue as a going concern.
Thirdly, my hon. Friend raised the point about the language in subsections (4) and (5) which could create the possibility of there being a slight gap in the status of the institution. The right hon. Gentleman said that he would re-check this, and in his letter he said:
I am confident that the clause as drafted ensures that there will be no gap between the expiry of one authorisation and the grant of another.
I thought it important to put those points on record because this is an exceptionally difficult technical question. To that extent, it is important to the banking community outside.
We are also considering an area relating to an extension with regard to the EEC. It will be recalled that members of the Committee were concerned about the nature in which confidential information of the bank was provided to other central banks. Under the proposed EEC directive, we thought that we would be forced to accept a commitment to divulge information to member States' central banks. An amendment that was not moved sought to limit it to them and to exclude other, non-member States.
The arguments were covered extensively in Committee, and I shall not seek to labour the point tonight. The thrust of that debate was very simple. We argued that there were very different kinds of legal, political and social systems in many other States, and to that extent we could not assume that following the disclosure of confidential information they would base their action in the same way as we would, especially with regard to risks to institutions and individuals.
To be fair to the Minister, he did not deny these risks, and in his letter of 12 February he said that
essentially they would be very remote contingencies".
My difficulty is that in Committee we were told that essentially it would be

wrong to help the EEC by limiting the information we would give to it, because it would be unfair to organisations such as the Federal Reserve Bank of the United States or the central banking authorities in, say, West Germany, which would be hurt by not receiving that amount of information.
However, I should like to read one other paragraph from the right hon. Gentleman's letter in which he said:
Nor would it be possible to confine 19(5) to EEC authorities, since it could be argued that the extra degree of confidentiality thereby afforded to customers of third country institutions amounted to favourable treatment of these institutions, which is again precluded by the directive.
I imagine that by this stage all hon. Members are as confused as I have become. With respect, I think that the Minister of State's advisers are a little wrong here. Surely the EEC directive must be concerned with seeking to give more information to help the EEC central banking supervisory authorities in the exercise of their supervisory functions. To that extent, any additional information that can be given is positive. Therefore, the provision of less information to non-EEC central banks cannot be regarded as less favourable treatment to the EEC. I accept that there is a lot of confusion here. Perhaps the Minister of State's advisers were a little confused by their acceptance—may be subconsciously—of the sensible arguments that we made in Committee that it was right not to extend the break in confidentiality of information.
I hope that the Minister of State will accept that his advisers were wrong in suggesting that this particular extension is precluded under the directive. These are obviously very technical points, and I appreciate the Minister of State's patience. However, this is a useful juncture at which to have a response from him, if it is at all possible.

Mr. Denzil Davies: Perhaps I can deal with the hon. Gentleman's last point, because the amendment relates to the EEC. I do not think that there is confusion, although I accept that this is a difficult area.
The argument put forward in Committee, and the main argument that I put forward now, is that if information were passed to the central banks within the


EEC, and not to the central banks outside the EEC, that would be prejudicial to the Federal Reserve Bank and other central banks. It would make it difficult for the Bank of England to get information from them, because this is the one way in which supervision on an international basis takes place.
If we were denied the opportunity, in very limited circumstances, to give this information to other central banks, they would not respond to us if for very good reasons we wanted that kind of information.
As to the EEC directive, we are really talking about the customers of banks in other countries. I am not saying that the point within the EEC directive is a substantial one, but it is a point. It is that if information about customers can be released to central banks within the EEC but not to central banks outside the EEC, it could be said that the customers of banks outside the EEC were in a slightly better position than the customers of banks within the EEC. That is where the direction comes in. I am not saying that it is a very strong point. I agree it is a rather confused and difficult area, but that is the distinction.

Mr. Moate: I wonder whether the Minister could help me on what is, I imagine, essentially a drafting and technical point. The amendments seek to cover unincorporated institutions formed under the law of another member State. There has been reference to the EEC directive, which, of course, does not need to be referred to in the Bill. Nowhere in the Bill can I see from a fairly quick scrutiny any reference to the European Economic Community, and there is no definition of what is a member State. I wonder whether the Minister is sure that we know that the Bill is correct in referring to a member State without defining the organisation it refers to.

Mr. Davies: I take the hon. Gentleman's point that perhaps we have not defined member States, but I do not think that it is necessary. Other Acts refer to member States, and I think the drafting is quite clear. The term "other member States" is fairly common now since we have entered the European Community.

Amendment agreed to.

Clause 8

POWER TO GIVE DIRECTIONS IN CONNECTION WITH TERMINATION OF DEPOSITTAKING AUTHORITY

Mr. Denzil Davies: I beg to move amendment no. 3, in page 10, line 19, after 'depositors', insert 'whether'.

Mr. Deputy Speaker: With this we may take Government amendments nos. 4, 5 and 6.

Mr. Davies: All the amendments are basically similar.
Amendments nos. 3 and 4 are concerned with the words in the clause regarding the safeguarding of the assets of the institution. The Bank might wish to take steps under the clause which perhaps could be said not to be strictly for safeguarding the assets of the institution, but certainly would be in the interests of depositors, because the moneys deposited with the institution are the assets of the institution. On the other hand, the Bank may still want to take action in the interest of depositors. This prevents anyone taking the point that any action taken by the Bank was not strictly for safeguarding the assets of the institution, although it might very well be for the benefit of depositors. It is a small technical point.
Amendment no. 5 deals with the Bank's ability to issue directions in respect of both existing and new deposits. It gives the Bank a certain flexibility, because the Bank might be quite happy to allow existing term deposits to be rolled over but would not wish the institution concerned to be able to call or advertise for new deposits. As the Bill is drafted, there is some doubt about the flexibility of the Bank. Amendment no 5 deals with that point.
Amendment no. 6 deals with additional licences and also enables a distinction to be drawn, if necessary, between existing deposits and new deposits.

7.15 p.m.

Mr. John Moore: I do not wish to cavil on the detail, but would not the Minister of State like to say a little more on that? Am I not right in thinking that amendments nos. 5 and 6 are a little more than technical amendments in the sense that they essentially extend the protection to


potential as opposed to actual depositors? I am not denying it, as I think that it fits into the character and pattern of the debate in Committee, but to the extent that it is something of an extension I should have thought that the point required comment and confirmation.

Mr. Denzil Davies: It is more than just a technical amendment.

Mr. Ian Stewart: While my hon. Friend the Member for Croydon, Central (Mr. Moore) was on his feet, I was thinking about the implications of what the Minister said on amendment No. 5. As I understood it, he said that there might be a difference in attitude between existing deposits and the seeking of new ones. As the amendment is phrased, it appears to prohibit the institution from soliciting deposits, either generally or from persons who are not already depositors. Does that mean that the powers would enable the Bank to issue directions which would prohibit it from soliciting deposits only from persons who are not already depositors?

Mr. Denzil Davies: Yes.

Mr. Stewart: It would?

Mr. Denzil Davies: Under the amendment, the Bank could look at either existing depositors or new depositors and say that the institution could solicit deposits for rolling over existing deposits, but there might be instances where the Bank would not wish to allow it to get new deposits.

Amendment agreed to.

Amendment made: No. 4, in page 10, line 20, after institution', insert or otherwise'.

No. 5, in page 10, line 27, after deposits', insert
'either generally or from persons who are not already depositors'.—[Mr. Denzil Davies.]

Clause 10

CONDITIONAL LICENCES

Amendment made: No. 6, in page 12, line 7, leave out from of 'to' already 'in line 9 and insert
'deposits, either generally or from persons who are not'.—[Mr. Denzil Davies.]

Clause 14

DUTY TO NOTIFY CHANGES OF DIRECTORS ETC.

Mr. Denzil Davies: I beg to move amendment No. 7, in page 15, line 15, leave out fourteen 'and insert twenty-one'.
This amendment results from an undertaking I gave in Committee. There was some discussion as to whether 14 days should be 14 working days. There are problems of drafting, and in Committee I said that I would prefer to extend the period. This amendment extends the period to 21 days.

Mr. Emery: I have to speak as I find my name placed on this amendment immediately under that of the Chancellor of the Exchequer. That is not because I have changed sides but because we both, together, put down amendments of exactly the same wording. Therefore, occasionally my drafting can be accurate and correct.
I am grateful to the Minister for taking the point I made in Committee. I understand his wish not to proceed with the period of 14 working days. For anybody who comes in to this debate new and does not know quite what we are talking about, the reason why there appeared to be the need for a longer period which a company could have before it was in default concerning notification of a change of director was best illustrated by the holiday period this Christmas.
If a decision on a change of director had been made on 21 December 1978, in the 14 days originally in the Bill we would have had two Saturdays, two Sundays, a bank holiday for Christmas day in lieu of the Saturday, a boxing day holiday in lieu of the Sunday, and a new year's day holiday. Therefore, the 14 days would have been cut to seven. If we include the Friday prior to the Christmas holiday weekend, when most Government offices in Whitehall were closed and many civil servants on leave—so were many bankers; it was not one-sided—then we would have reduced the period of 14 days to six.
In Committee we were considering using working days, and this would have extended the period from 21 December 1978 to 12 January 1979. The amendment


that we now look like accepting would extend that period from 21 December 1978 to 11 January 1979. That seems quite reasonable, and it overcomes some difficulties which large companies have in processing board minutes before notification can go forward to the necessary authority.
I am delighted to welcome the Minister's amendment, which seems to meet all the points we wished.

Amendment agreed to.

Clause 18

WINDING UP ON PETITION FROM THE BANK

Mr. Denzil Davies: I beg to move amendment no. 8, in page 18, line 33, leave out
by obtaining additional deposits or".
This amendment, too, results from a debate in Committee. The point was raised by the hon. Member for Honiton (Mr. Emery) initially in relation to powers to declare an institution insolvent and to wind it up. The problem was that, if the institution could balance its liabilities and assets by obtaining the additional deposits, it was not very clear as the Bill was drafted whether it would be outside the powers of insolvency and winding up. We have knocked out the words
by obtaining additional deposits or
which meets the point made in Committee.

Mr. Emery: The Minister has done exactly what we urged in Committee. We accept that he needed to consider this matter further and we are grateful that he has used usefully the time between fir Committee and Report stages. We applaud the amendment.

Amendment agreed to.

Clause 20

INFORMATION DISCLOSED TO THE BANK FROM OTHER SOURCES

Mr. Denzil Davies: I beg to move amendment no. 11, in page 22, line 27, leave out "(4)" and insert "(3)".
This amendment ensures that the information which is passed to the Bank by

the Department of Trade or the Northern Ireland Department of Commerce can then be passed by the Bank to its professional advisers under clause 19(3). This amendment is consequential on the principle agreed in Committee which allows the Bank to pass information to its special advisers where this is necessary to enable it properly to discharge its functions under the Bill. This relates to information which, under the Bill, the Bank can obtain anyway from the Department of Trade or the Northern Ireland Department of Commerce.
As the Bill stood, that information could not have been passed on to the Bank's professional advisers. If this amendment is accepted, the Bank will be able to do that, but confidentiality will be protected because the provisions of section 111 of the Companies Act 1967 still apply to that information. Whether that information is in the hands of the Department of Trade or the Bank of England's professional advisers, its confidentiality is protected by the 1967 Companies Act.

Mr. John Moore: I do not wish to delay the proceedings, but the Minister of State acquired an enviable reputation in Committee for having a delicate manner of introducing amendments which always seemed to carry a good deal more relevance than we first thought.
When I first saw this small amendment substituting (3) for (4), it took a considerable time to assess it. I associate myself with the remarks of my hon. Friend the Member for Hitchin (Mr. Stewart) about our having these amendments only last night and being forced to try to relate clause 20 to clause 19. This is an extension of an area of great importance—the disclosure of information by the Bank which it has received from other sources. It interrelates very closely with clause 19. Although I accept that it tidies up the provisions for Northern Ireland, to the extent that clause 19 is very important, I hope that the Minister of State will recognise that we shall want to return to this matter on Third Reading as many of us are disturbed about the way in which information under clause 20 is very wide.
The limitations that we discussed in Committee and the degree to which decisions may be made in the public interest


need to be referred to on Third Reading. The Minister of State would be fair to tell the House that we are adding somewhat to the degree to which information can be disclosed to the Bank and can be given to sources other than supervisory bodies. It is specifically given here to those who are professional advisers to the Bank. It is an extension, and it is an extension of a breaking of a confidence. I think that there is more to it than the Minister of State has said.

Amendment agreed to.

Clause 23

CONTRIBUTORY INSTITUTIONS AND GENERAL PROVISIONS AS TO CONTRIBUTIONS

Mr. Ian Stewart: I beg to move amendment No. 12, in page 25, line 2, leave out 'five' and insert 'two'.
The point of the amendment, which follows a debate in Committee, relates to the length of deposits which should be excluded from the deposit base of a bank or a licensed institution for the purpose of assessing its contributions to the deposit protection fund.
In Committee I suggested that it would be unfortunate if we introduced for varying purposes different lengths of time of deposits which would be excluded for one purpose or another. In suggesting two years in this context, I had in mind that two years rather than five is the time limit of the deposits which qualify for being included in the interest-bearing eligible liabilities in the banking system, which have become such an important part of monetary control and the money supply.
In my experience in banking, deposits of more than two years in length are pretty exceptional. Therefore, it would not greatly affect the operation of the deposit protection scheme if two years were substituted for five. On the basis that we should try to have the same length of time for as many purposes as possible, I think two years is preferable. Computers must be programmed to throw out exceptions to any rule, and if deposits over five years for one purpose are to have an importance and deposits over two years are to have an importance for another purpose this leads to complications.
The Minister said that he would reconsider this matter. In his letter of 12 February he said:
I have considered whether the term to maturity under which deposits would be excluded from the deposit base and from protection should be reduced to two years, but in the absence of conclusive arguments I prefer that the present wording should stand.
The Minister has reported his view, which I thought it was proper to place on the record. It is not a matter which we would want to press, but we still prefer two years to five.

Mr. Denzil Davies: These cases are always difficult. I have considered this again with advisers from the Bank of England and the Treasury. There is no great issue of principle here. On balance, my advisers prefer five years to two. I accept entirely what the hon. Member has said. I try to be as accommodating as possible, but in this case I should accept the advice of my technical advisers. I prefer therefore to stick to the period of five years.

Amendment negatived.

Clause 26

SPECIAL CONTRIBUTIONS AND POWER TO BORROW

Mr. Ian Stewart: I beg to move amendment No. 13, in page 26, line 37,
leave out 'should' and insert may'.
This was another point which occurred in Committee. It is not significant and it relates to a technicality. In Committee I suggested that there was an inconsistency in the wording between clause 26(5) and the preceding clause. The wording of clause 26(5) is:
Any amount borrowed by virtue of subsection (3) above shall be disregarded in ascertaining whether the amount standing to the credit of the Fund is such that the Board should exercise their power to levy further contributions … 
Clause 25(1) says:
the Board may, with the approval of the Treasury, levy further contributions … 
I was in error in Committee, because I was contrasting the word "shall" in the second line of subsection (5) with the word "may" at the beginning of clause 25 rather than "should" in the third line with "may". That may have been a simple error or it may have been a slip


of the tongue. The Minister felt that it was not necessary to do anything about it and he was right, because I think that I must have made the wrong point. Let me now make the right point. It is "should" which should be altered to "may" in order to harmonise the two.

7.30 p.m.

Mr. Moate: I congratulate my hon. Friends on the attention to detail which must have engrossed them in Committee if they had to concern themselves with the difference between the words "shall", "may" and "should". I am sure that they all have great implications, but they are a little difficult for some of us to follow.
I wish to ask a question that is in order in terms of the amendment and I do so because I think that a technical mistake may have been made in the Bill. The problem arises over the initial funding of the board. It is clear that the board can borrow substantial sums to supplement its funds and that the expenses of the board can be met not only from the initial fund but from subsequent levies or from the money that it can borrow, but where do the expenses come from when the board is initially established?
The board has to be in existence before it can make a levy on banks, send out requests and make assessments or borrow money. At some stage there will be initial expenses, and I can see no provision for them. I should hate there to be a slip-up on such a detail.

Mr. Denzil Davies: There is no problem about what the hon. Member for Faversham (Mr. Moate) has said. The fund is part of the Bank of England and all the expenses will be met through the Bank. There will be no levy on banks for expenses and no licence fees will be charged to banks by the board.
The hon. Member for Hitchin (Mr. Stewart), with his keen eye for the detail of the Bill, has made a good point, and, in view of the reasonable way in which he always moves amendments, I am happy to recommend that the House should accept the amendment.

Amendment agreed to.

Clause 27

MAXIMUM AND MINIMUM CONTRIBUTIONS

Mr. John Moore: I beg to move amendment no. 14, in page 26, line 42, leave out "£5,000" and insert "£2,500".
The amendment raises an important issue which we discussed in Committee. For those who were not privileged to serve on the Committee, may I say that the amendment relates to the minimum initial contribution and proposes that it should be reduced to £2,500 for institutions.
Despite the extremely co-operative attitude of the Minister of State throughout the Committee proceedings, this is one area in which no answers were given to the case made by many of my hon. Friends on behalf of smaller institutions. I shall reiterate briefly the arguments that we advanced in Committee, because we have not yet had rejoinders to them.
The evidence of the Consumer Credit Trade Association was the basis for some of the points that we made. I accept that there is a great deal of doubt about the number of institutions covered by the association that would come within the purview of the legislation, but that does not alter the fact that many similar small institutions may be hurt.
We were told by the association that it had about 560 finance house members and that 150 of those took deposits. We are not sure how many of those 150 come within the purview of the legislation, but, if we extend those figures and take into account the institutions that are not members of the association, we could suggest that there may be as many as 440 such finance houses taking deposits. That is a substantial number. There may be other small institutions that we do not know about, and I know that some of my hon. Friends wish to raise issues concerning particular small institutions.
The association's survey showed that 39 of the 150 deposit-taking members had deposits of less than £10,000 each. The suggested minimum initial contribution would be the equivalent of 50 per cent. of their deposit base. Another 25 institutions had a deposit base of less than £20,000 each and the minimum initial contribution would represent about 25 per cent. of their deposit base. An


additional 20 institutions had deposits of less than £50.000 and the minimum initial contribution would be the equivalent of about 10 per cent. of their deposit base.
For a substantial proportion of those institutions the proposed miniumum initial contribution would be a significant percentage of their overall deposit base. It would be an absurdly high proportion. It is relevant to remind the House of the key thrust of the nature of the fund and the character of the legislation that we are discussing.
The legislation seeks to protect depositors. In Committee, we began to see, when we considered the character of the initial contribution and, particularly, its impact on small institutions, a confusion in the Government's arguments concerning the protection of depositors, as opposed to the character of the club being set up by those making contributions. We were told in Committee:
£5,000 is a kind of entrance fee".
We were also told that:
If an institution could not pay the £5,000, it might not be in very good shape.
In addition, the Minister said:
I do not accept that it is a lot of money for a small deposit-taking institution."—[Official Report, Standing Committee A, 23 January 1979; c. 287-8.]
The Treasury wrote to Mr. C. McNeil Greig, the head of the Consumer Credit Trade Association, in response to its comments to the Treasury. That letter of 6 February said:
it is necessary to provide for some minimum contribution in order to give balance to the scheme and we believe that a minimum figure of £5,000 gives the correct balance.
But none of those points has any relevance to the protection of depositors. They show how the setting up of such organisations often leads to the development of a bureaucratic "tidy" frame of mind. We have decided, legitimately, that there must be a fee, but we have adopted the peculiar characteristic shared by so many people of thinking that if a reasonable club is established it must have reasonable dues and that if they are too inexpensive the club cannot be respectable. The figure of £5,000 sounds respectable, but it has no relevance to the nature and character of the institutions which the Government intend should pay it as the club fee.
Not only does this proposal not concern itself with protecting depositors but, in so far as the size of the initial contribution could hurt some small institutions—I do not say that it could mean the difference between whether they did or did not go into this business—it could create difficulties for depositors when the Bill seeks to protect them.
The case made by the Opposition in Committee has not been answered other than by the administrative decision that it was necessary to have a fee. That is not sufficient to carry the case in the House. especially when we are seeking to encourage the development of small institutions.

Mr. Hector Monro: I am glad to support this important amendment. It may be that I can bring home to the Minister some of the practical problems affecting two of the three savings banks in Scotland, both of which happen to be in my constituency. I refer to the Annan savings bank and the Lockerbie savings bank, which did not opt to join the trustee savings bank movement and which, for very good reasons of their own, still operate under the 1819 Act.
We in Parliament have a duty to see that small savings banks are not affected adversely by this legislation. Unfortunately, they will be. The two of which I speak are small, efficient and effective and have first-class boards of directors. The Annan and the Lockerbie banks are very similar in many ways. However, I take the Lockerbie bank as an example.
In 1877, more than 100 years ago, deposits and reserves were of the order of £10,000. Today, more than 100 years later, they are more than £800,000, with 2,400 depositors—mainly local farmers, small business men and professional men, who are proud of that bank.
The Government should be concerned to protect minorities such as small banks which are trading perfectly legitimately under their own names. It is important also to ensure that there are some small banks which retain their local identities and associations with the areas in which they are situated.
I accept that in the moves towards this Bill over the past two years the Treasury has been helpful. It made a number of


concessions before introducing it, although the permission to savings banks to keep their own names was very minimal. Had it not been accepted, I suggest that there would have been a major row.
The main issue involved in this amendment is the deposit protection scheme. As my hon. Friend the Member for Croydon, Central (Mr. Moore) pointed out, the scheme is reasonable in principle. But it will not work in practice as fairly as, I suspect, the Minister hones.
7.45 p.m.
The scheme calls for a minimum subscription of £5,000. I suspect that the Minister and his colleagues worked that out on 0·3 per cent. of deposits. Of course, that may be perfectly satisfactory for the vast majority of our major banks. But, in the case of the Lockerbie savings bank, 0·3 per cent. of deposits equals £2,200. That means that this small bank will have to pay a deposit to fund the scheme which represents a very much higher proportion of its deposits than that of almost every other bank which the Minister may care to name.
Under the Bill, instead of paying £2,200, which even the Bank thinks is fairly hefty, the Lockerbie bank will have to pay £5,000 and, although we all hope that subventions of this type will be required to be paid infrequently, for all we know it could happen annually. It will depend entirely on the claims on the fund.
This is a big sum for a small bank, even if it is highly efficient. For the Lockerbie bank, a contribution of £5,000 is equivalent to putting up administrative charges by between 25 per cent. and 30 per cent. At a time when we are all trying to keep down costs, this is not a very encouraging way to proceed.
The sum is also equivalent in lost interest to about 10 per cent. of management expenses and, of course, it will reduce the bank's income by about 1 per cent., thereby reducing its reserves.
The assets of the bank have never fallen in the 156 years of its existence to less than 75 per cent. of deposits.
What is the justification for treating small banks in this way? We want to help small businesses and not discourage them in the way that this heavy imposi-

tion must. It may be administratively convenient, but it is manifestly unfair to these small saving banks.
I wish to echo one of the quotations read from the proceedings in Committee by my hon. Friend the Member for Croydon, Central. The Minister said:
But my point is that £5,000 is not a lot for a small institution to pay, and the protection for its depositors should help it in its business. If an institution could not pay the £5,000, it might not be in very good shape."— [Official Report, Standing Committee A, 23 January 1979; c. 288.]
I have shown from the various figures that I have given that the money involved here could be much better used than for the deposit protection scheme. What is more, because the bank is in such good shape, the Minister's words fall to the ground there and then.
It may be through inadvertence or because the Minister was not apprised of the position of the small savings banks, but the £5,000 appears to have been grasped out of the air as being a sum about which a major bank could not care less. However, it appears that no consideration was given to the small banks.
I hope that the Minister will think again about this. If he will not accept this reasonable amendment, bearing in mind that it will affect comparatively few banks in practical terms, it may be that he will consider redrafting the clause so that the small banks may pay either the equivalent of 0·3 per cent. of their deposits or the £2,500 which we propose. After all, even that is high in the view of the two banks to which I have referred.
In my view, the small banks have a cast-iron case. I am sure that this proposal has been introduced by the Government through inadvertence. The Minister ought to take the opportunity to put it right in another place if necessary and bring back to this House the news that he has seen fit to help the small savings banks. After all, they are doing an immensely important job. We are crying out for everyone to make savings. Here are banks which are accepting them and paying a very reasonable rate of interest. They are doing just the sort of practical work in terms of banking which the Treasury commends. Here is a chance to reciprocate and help these small banks. I ask the Minister to think about this amendment very carefully.

Mr. Emery: I wish to urge the Minister yet again to deal with this matter as we did in Committee, where there was a tied vote. I still feel that the Minister's arguments in Committee do not accord with his general approach of trying to look after the smaller end of the financial industry. My hon. Friend the Member for Croydon, Central (Mr. Moore) spoke much more succinctly on the statistics that I had used in Committee. He referred to the Bill as being a protection for depositors Bill. It would be wrong for people to believe that this is the only or major aspect. The major aspect of the Bill is contained in the first sentence of the long title:
To regulate the acceptance of deposits in the course of business; to confer functions on the Bank of England with respect to the control of institutions carrying on deposit-taking ….
The major point of the Bill is therefore the control of the banking system rather than protection for the deposit-taking side.

Mr. John Moore: I always listen with care to the wisdom of my hon. Friend the Member for Honiton (Mr. Emery). He is totally right. I would not wish only to emphasise the protection of depositors aspect. But we are now discussing the concept of the fund which is essentially the outcome of the legitimate demand to seek some form of protection. Whether or not we like that form, that is what we are discussing.

Mr. Emery: I agree entirely with my hon. Friend. It would be a mistake if the Minister did not accept this amendment. A number of deposit-taking bodies provide banking services as part of their business operation and should come within the scope of the Bill. It has been suggested by one of the associations concerned that these smaller organisations will stop taking deposits. They will go outside the Bill. I do not want to see that happen.
Nor did I believe that was the intention of the Minister. I did not think that he was attempting to make any of the bodies at the bottom end—as long as they were respectable—which have been carrying on a deposit-taking business which might assist their overall financial operation, cease that business.
The management of companies which might have to pay a contribution of 20

per cent., 25 per cent. or 30 per cent. of their deposit side into the fund would find that unacceptable. It may be better for them to return the deposits and stop doing business of that nature. I do not think that was the Bill's intention. We do not want to drive them out. There is some reason for having them within the Bill, hoping that they may expand. There is obviously room for expansion if they are taking deposits of only £20,000 or £30,000 a year. They should come within the general supervision of the Bank of England.
The Treasury is fighting on a partially false point. The one real argument is that it is not charging a registration for the licence and that the Bill replaces that. For the big bodies, that is sensible. But the argument does not hold much sway with the small firms at the bottom end of the industry. The fee in small areas of profitability of £40,000 or £50,000 is much too high for these small companies It should not be asked. The fund would not lose much money. The number affected would be very small. What is the point, other than the stoical principle that the Government have said that this is what they will do and they will hold to it? This has not been the Minister's approach in Committee. It is difficult for me to see the objection to the amendment that has been moved.

Mr. John Moore: My hon. Friend will not have seen the letter sent by the Treasury to the Consumer Credit Trade Association. It adds to the point that he is making. The letter states:
Without detailed information in respect of the deposit-taking activities of the particular institutions, it is, of course, not possible to say precisely which institutions will be excluded by the provision, but we believe that it will exclude a very large proportion of cases"—
I am being as fair as I can—
where a small business is financed by friends or relatives.
I am trying to help my hon. Friend. There is clearly an area of great doubt. We do not know the number of small institutions we are talking about. It makes it even more important, when the Treasury is unaware of the total number, that we should not seek to create difficulties that would reduce the size of this sector.

Mr. Emery: I thank my hon. Friend. This greatly helps my argument and reinforces the point I am making. Why do


we want to appear beastly to these very small bodies? It seems unnecessary and a little insidious. If my hon. Friend the Member for Dumfries (Mr. Monro) wishes to press this matter to a Division, I would be willing to go into the Lobby to support him.

8.0 p.m.

Mr. Moate: As I have said, I come fresh to the Bill, but I understand that the Minister has been very reasonable in previous debates. I am therefore surprised to receive the impression that he is being obdurate in this respect.

Mr. Denzil Davies: I have not said anything yet.

Mr. Moate: That is true—how unfair can I be? Perhaps I am misjudging the position and the Minister will concede the point.
My hon. Friends seem to have made an overwhelming case for reducing the minimum figure from £5,000 to £2,500. My hon. Friend the Member for Honiton (Mr. Emery) concluded his admirable speech by suggesting that the present limit was beastly to small businesses. I am sure that the Minister is not one of those Labour Members who want to be beastly to businesses, big or small. I expect that argument from his hon. Friends below the Gangway—they seem to think that any "financial institution" must be large, impersonal and profitable, extracting large sums from ordinary people—but the Minister of State and the hon. Member for Thornaby (Mr. Wrigglesworth) know better. I expect that the latter will speak and vote in support of the amendment. I certainly shall, because it is fundamentally right, but I hope that the Minister will accept its logic and equity.
It is inequitable that many worthy small businesses will be penalised by this provision. My hon. Friend the Member for Croydon, Central (Mr. Moore) mentioned a survey—it could not represent all the financial institutions affected—which showed that 39 had deposits totalling less than £10,000. No one suggests that they will not be licensed to take deposits or that the Bank of England will frown on them. They are apparently perfectly acceptable and will be allowed, even encouraged, to carry on business.

Are such institutions to be asked to pay £5,000 into the central fund? That proposal cannot be defended.
That survey also showed that 25 other institutions have deposits of less than £20,000 and 20 more of less than £50,000. Yet these are only representative figures and there will be many other institutions which will be properly licensed and will have to pay out £5,000. I have seen no justification for that.
My hon. Friend the Member for Honiton talked of the main purpose of the Bill. Surely it is not to protect depositors by paying compensation on a collapse. It is to prevent collapse—prevention rather than cure. The object is a full licensing procedure, a system of scrutiny, control and regulation, which will prevent collapse in the first place. If a collapse occurs, in many ways the system proposed by the Bill will have failed. It will not make a scrap of difference to depositors then whether that little institution had paid out £2,500 or £5,000. The institution will have been weakened because the Bank of England had been required to take £5,000 rather than £2,500.
The £5,000 minimum does not meet the main objectives. It undermines them by weakening the institutions that the Bill and previous Acts seek to sustain. This is an unfair penalty on small businesses; it is a regressive form of taxation. I cannot believe that that is the Minister's intention. I hope that he will continue his consistent helpfulness and accept the amendment.

Mr. Denzil Davies: Hon. Members have made impassioned pleas for a reduction of this figure from £5,000 to £2,500. If the Bill had specified £2,500, no doubt there would have been an amendment to reduce it to £1,250 and we should have heard impassioned pleas on behalf of institutions with deposits of £5,000. But that is the nature of the House. When a concession is given, another is requested and concession follows concession.
The hon. Member for Dumfries (Mr. Monro) made a strong plea for some smaller institutions in his constituency. We are well aware of their representations. They are not backward in putting their representations to the Treasury—quite rightly—and at least, as he said, we have been able to help them in some ways.
The argument for £5,000—any figure is bound to be arbitrary to some extent—was the need to preserve some balance. On Second Reading, Opposition spokesmen said that, because the clearers would have to pay out large sums and they would never get into difficulties, they would in effect be subsidising the smaller banks. Now the argument is reversed: we are told that the smaller banks should not pay so much. There has to be some balance between the contributions of the larger and smaller institutions.
Also, although hon. Members may not thtink it very important, it will be helpful to smaller institutions that we shall not charge licence fees. There is also a tax liability which reduces. I do not know the profits of the Lockerbie savings bank, but if it were paying corporation tax or income tax at 40 per cent. or 50 per cent., that would halve its contribution. At least we were able to meet that point.
However, despite all that, despite what the hon. Member for Faversham (Mr. Moate) said, despite this Government's good record on small businesses, in whose regard we have done more than any previous Government, and because the hon. Member for Dumfries comes from that other Celtic fringe of Great Britain—this is the sort of thing which sways Ministers on Report—I am prepared to say that I shall be happy to accept the amendment.

Mr. John Moore: With the leave of the House, Mr. Deputy Speaker, I will say a few more words. I am sure that my hon. Friend the Member for Faversham (Mr. Moate) will understand why the deliberations in Committee were so delightful since the Minister of State, with intelligence and generosity, has accepted the amendment. One could say nothing but complimentary things about him. The extent to which the activities of the Celtic fringe are beginning to focus the attention of minds is remarkable.
I compliment my hon. Friend the Member for Dumfries (Mr. Monro). If we had had his help in Committee, the Minister of State might have accepted each of the amendments that we pressed. I also thank my hon. Friends the Members for Honiton (Mr. Emery) and for Faversham. It is an important victory. I am delighted that we pressed this amendment. I am glad that our arguments have been met. This represents an

important victory for the smaller institutions. I thank the Minister of State for accepting the amendment.

Mr. Deputy Speaker: With such pleasantries, perhaps hon. Members will begin to lend each other money.

Amendment agreed to.

Clause 28

PAYMENTS TO DEPOSITORS WHEN INSTITUTION BECOMES INSOLVENT

8.15 p.m.

Mr. Emery: I beg to move amendment no. 15, in page 28, line 3, at end insert—
'which amount shall be increased to ninety per centage of the protected deposit if the deposit was made by an individual or a partnership'.
I am not sure that I carry all my hon. Friends with me on this amendment, but it is a new amendment covering a matter with which we did not deal in Committee.
I am not arguing the case for or against the deposit protection fund. There are strong arguments for saying that we do not need the fund because the protection can be provided by insurance. I am arguing on the basis that the fund will exist. But I wish to make that fund as sensible and as reasonable as possible.
As the Bill stands, a protected deposit is defined. The Bill provides that, if any deposit-taking institution or bank goes into liquidation or runs into financial problems, the depositors shall be protected. They are to be protected up to an amount of £10,000, and 75 per cent. of their deposits up to that sum will be paid back from the fund.
The amendment attempts to differentiate between companies, private individuals and partnerships. If the amendment is not accepted, the individual small depositor will have no greater protection than a company. What is more, the protection that the depositor will receive will be less than he receives at present. I cannot believe that that is right.
I have said that we should afford different treatment to companies and individual depositors, and I have some good precedents for saying that. The Policyholders Protection Act protects the small individual policyholder. Under that Act the protection is 90 per cent. for individuals and partnerships. The Minister has


been in the House long enough to know that there is sense in legislation which runs in parallel and on similar terms. There is, therefore, sense in providing the same type of protection.
In Committee and on Second Reading I said that no depositor, whether British or foreign, has lost a penny of any deposit that he has placed in a City of London bank. I extend that statement and say that no one has lost a penny deposit in a British bank.
The Minister said that he had received a letter from someone who wanted his money back. I am sure that the Minister will discover that that person was not a depositor but a shareholder in a deposit-taking institution. I stand to be corrected, but the information that I have obtained shows that in this century no depositor has lost a single penny. If that is so, the Bill reduces the protection to the consumer.
Today the consumer knows that should something go wrong the financial organisations will come together, sometimes under pressure from the Bank of England, to buy out or inject money into the weak institution or, in the worst instances, to put into operation a major rescue operation such as the lifeboat. Today depositors have the massive assurance of the solidarity of British banking. They have never lost one penny of their deposits.
The Bill weakens the consumers' protection. We should ensure that we provide more than 75 per cent. protection to the weakest section of depositors.
Many individuals in banking who may not know much about banking or anything else might turn themselves into limited companies. It is argued that they should receive as much consideration as individual depositors or partnerships. I concede part of that argument, but the issue is not as comprehensive as that.
If we had to define the depositor with the least knowledge of banking institutions, we would name the private individual and not the company. It would be a private individual whether on his own or in partnership. It might be argued that the amendment was less acceptable to the major banking houses because it would involve them in more work and greater cost in reporting while failing to

make a distinction between themselves and private companies, which might reasonably be regarded as small depositors.
The amendment is not supported by the clearing banks association, or by the finance houses. The big organisations are not necessarily concerned with it. I am advancing this proposal as an act of consumer protection, because I believe that if there is to be protection it should be for the small individual depositors.
The Minister might accuse me of adopting an Alice-in-Wonderland approach and say that I was fabricating a case which on the whole was based only on supposition. I could almost accept that argument. If he made it convincingly, I probably would accept it. It is unlikely that the fund will have to pay out. I realise that in saying that I am looking into the crystal ball, which is a dangerous thing for a politician to do. I do not say that that would apply on the insurance side, but I believe that the fund is unlikely to have to pay out on the banking side. I believe that in the interests of the reputation of the City of London and British banking, the same support will be sustained after the Bill becomes law as was operative before.
Therefore, if the Minister wished to argue against my amendment by saying that it was unlikely that the fund would ever have to pay out, I would accept his argument, but I would turn it on him and ask why we need a fund at all. However, I promise the Minister that I will not get into that argument because it is not relevant to the amendment and I know you well enough, Mr. Deputy Speaker. to know that you would get me back into order soon enough if I digressed into that area for too long.
I realise that I am ploughing a lonely furrow with this amendment. The bigger institutions see no major benefit from it. They argue that it could encourage people to make deposits with the less reputable deposit-taking institution or bank. That argument, however, is unacceptable, because there is at present 100 per cent. protection for any of those institutions. The clearing banks and the Bank of England have accepted that duty. Therefore, under my amendment there would be less protection than now exists.
I hope, therefore, that the Minister will take this opportunity not only to make a mark for himself as the protector of small businesses but as the guardian of the small depositor. I hope that I have persuaded him that the amendment is not unreasonable. If I have succeeded, I shall have to make my peace with some of my hon. Friends.

Mr. Deputy Speaker: The hon. Member for Honiton (Mr. Emery) has had two victories already this evening.

Mr. Denzil Davies: Much of the substance of this amendment was discussed in Standing Committee. I tried to explain then why we had decided to go for a figure of less than 100 per cent. I tried to deploy the arguments on both sides, bearing in mind that some people wanted 100 per cent. protection. We had ultimately to accept that there should be a certain amount of risk because without risk some institutions would be encouraged to pay a higher rate of interest than would otherwise be prudent, knowing that they could be protected.
This is not a matter of large versus small. A larger organisation might decide to pay a higher rate because of the protection that was available.
The hon. Member for Honiton (Mr. Emery) has said two or three times that no depositor has ever lost money with a British bank. I do not know how he defines a British bank, but I see the hon. Member for Monmouth (Mr. Stradling Thomas) present. I will not regale the House with the trials and tribulations of my uncle some years ago in West Wales, but the hon. Member for Monmouth will probably recognise the situation to which I am alluding.

Mr. Deputy Speaker: If the Minister wants examples, I, too, can give one. My wife has a bank. I deposited money with it and I never saw the money again.

Mr. Davies: I hope that the hon. Member for Honiton will not again tell us that nobody has ever lost money deposited with a British bank. I am grateful to you, Mr. Deputy Speaker, for corroborating my argument.
In considering the amendment, one could say that there was no reason to bring in partnerships. That would be a

fairly easy debating point for me to score. Why should a firm of accountants in the City of London—perhaps 40 firms in a partnership—get 90 per cent. protection when a small business man in West Wales who forms his own company can get only 75 per cent.? The accountants are far more sophisticated than the small West Wales business man. One cannot therefore draw that kind of distinction.
It is difficult to determine what figure to choose. We think that 75 per cent. is fair, but in choosing the figure one cannot differentiate between individuals and companies. There is great difficulty in that, and it would be unfair to small businesses that incorporated for good reasons. Therefore, on this occasion I cannot help the hon. Gentleman, and I advise the House not to accept the amendment.

Mr. Ian Stewart: With your intervention, Mr. Deputy Speaker, with the presence of my hon. Friend the Member for Monmouth (Mr. Stradling Thomas) in the Whip's seat, and with the Minister's speech, the Celtic fringes of the kingdom are exerting their effect in a less happy way than occurred earlier in our proceedings.
My hon. Friend the Member for Honiton (Mr. Emery) said that he thought he might not obtain the support of his colleagues for the amendment. I have to say that, for reasons similar to those advanced by the Minister, I believe that it would be wrong to go to a figure of 90 per cent. On Second Reading I said that I wondered whether 75 per cent. was not too high to provide the incentive to prudence which is clearly needed in this scheme. Since then I have given the matter greater thought and reached the conclusion that a figure lower than 75 per cent. would not be proper.
On the other hand, I feel, equally, that a figure higher than 75 per cent. would remove a critical element, namely, that a depositor must have some regard to the nature of the riskiness of the institution with which he makes the deposit. I therefore feel, as does the Minister, not entirely in sympathy with the proposal in this amendment, although I compliment my hon. Friend on the way in which he has presented his argument since it has raised a number of interesting points lying behind the choice of the percentage figure.

8.30 p.m.

Mr. Emery: By leave of the House, may I thank my hon. Friend the Member for Hitchin (Mr. Stewart) and the Minister for their answers? I do not entirely accept them. The point of most relevance concerns the variation between partnerships and the private individual. I take the point that a large partnership of major accountants in the City should not be excluded in this way. I was trying, as a matter of consistency, to use the same type of judgment as had been used in the Policyholders Protection Act.
I give notice that I shall try to urge some of my noble Friends in another place to raise this point as it applies to the individual, since such an approach might whittle away some Treasury resistance. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 16, in page 28, line 34
'(4A) For the purposes of this Part of this Act, an unincorporated institution which is formed under the law of another member State and is not a partnership becomes insolvent on the occurrence of an event which, under the law of that member State, appears to the Board to correspond, as near as may be, with any of the events specified in paragraphs (a) and (b) of subsection (3) or paragraphs (a) to (d) of subsection (4) above.'.—[Mr. Denzil Davies.]

Clause 29

PROTECTED DEPOSITS

Amendments made: No. 17, in page 30, line 6, leave out from "is" to "unless" in line 9 and insert—

'(a) a body corporate formed under the law of a country or territory outside the United Kingdom,
(b) a partnership whose principal place of business is in such a country or territory, or
(c) any other unincorporated institution formed under the law of another member States'.

No. 18, in line 10, at end insert—
'or, as the case may be, under the law of that member State '.—[Mr. Denzil Davies.]

Clause 36

RESTRICTION ON USE OF CERTAIN NAMES AND DESCRIPTIONS

Mr. Ian Stewart: I beg to move amendment no. 19, in page 38, line 8, leave out
or is carrying on a banking business".
I am afraid that we shall have to spend a few moments on amendment No. 19. Clause 36, which is the equivalent of clause 35 in Committee, gave us as much trouble and anxiety as any other part of the Bill. It relates to restrictions on the use of banking names and descriptions by those in the licensed sector. We had a preliminary discussion of this on Second Reading and followed that through on a number of further debates in Committee.
One of the consequences of our debates was that in Committee the Government tabled amendment no. 119, which inserted a new subsection (4) in clause 36, which is meant to allow some reference to banking services provided by members of the licensed sector. In essence, the basis of clause 36 involves the separation of the recognised banking sector from the licensed sector. It permits the free use of the terms "bank", "banker" and "banking business" only to those who are members of the recognised banking sector. A large number of bodies of varying kinds which can expect to be in the licensed sector will not be able to describe themselves as banks. Those involved will not be able to call themselves bankers and they will not be able to say that they carry on a banking business.
On Second Reading I said that I was very doubtful whether it was possible in that way to redefine the meaning of a common word by Act of Parliament, and having sat through a fairly lengthy Committee stage and given the matter a good deal of further thought, I still believe that it is not desirable—certainly not desirable, and quite likely not possible—to redefine these words and make the use of "bank", "banker" or "banking business" much stricter than it has been in the past in this country.
The bodies which will be affected have naturally welcomed the Committee amendment no. 119, which allows them provided that they carry on certain banking services, to say that that is what they


are doing, but I understand that they have continued to make representations to the Treasury, as they have also to me and to other members of the Standing Committee, that that does not go very far.
The purpose of the present amendment, therefore, is to open up the question whether there is anything particularly sinful or dangerous in licensed deposit-takers describing themselves as carrying on a banking business. This does not go nearly so far as we suggested in Committee, when we argued that they should not only be able to describe themselves as carrying on a banking business but should be allowed also to describe themselves as banks or bankers so long as it was not for the purpose of taking deposits.
In the present amendment, the suggestion is much more limited. We are not saying that they should be allowed to call themselves banks or bankers, although I think that the case for that may still stand. We suggest here that when such a company is not to become a recognised bank but is in fact carrying on a banking business, it should be allowed accurately to describe what it is doing.
From conversation with a number of the institutions concerned, it is apparent that they are banks and that they will continue to be banks and will continue to carry on a banking business, but they will not be allowed to say so under the terms of the Bill as now drafted. Their difficulty will be quite far-reaching. I have said that amendment No. 119 in Committe, now subsection (4), is an advance on the way the Bill originally came forward, but after further thought I still believe that it does not go far enough.
The licensed sector will be placed at a disadvantage against, for example, foreign competition. A company which is a bank in, say another member State of the EEC may not have to satisfy nearly such strict criteria to be allowed to use the word "bank" or the equivalent in its name as British companies will have to do if the Bill remains unamended in this respect. That should always give us pause for thought. I do not believe that we should allow ourselves to put our own companies in this country at a disadvantage against foreign competitors where we have the option to do otherwise. Indeed, I could put it more strongly and say that if we were to have a bias in any

direction we should try to give an advantage to our own companies as against those from overseas. Certainly, we should not do the opposite.
I return to the point made by my hon. Friend the Member for Honiton (Mr. Emery) in an earlier debate, that the prime purpose of this part of the Bill is to protect depositors. It should not be to change the meaning of everyday words such as "bank", "banker "or "banking business". I doubt that any depositors would be put seriously at risk if a company carrying on a banking business which is a licensed deposit-taker reporting regularly to the Bank of England and therefore supervised in many of the details of its business and backed up by the existence of a deposit protection fund, which, under the terms of the Bill, could be anything up to £250 million, were allowed to say what it was doing. Is there likely to be much extra risk to a depositor if the institution were allowed to say that it was carrying on a banking business when that was in fact the case?
It is possible to suggest amendments to clause 36 almost without limit by adjusting the words here or there to reduce the restrictive force of the way in which it is at present drawn. Amendment no. 19 was tabled because we felt that we did not satisfactorily resolve in Committee why we could go as far as "banking services" and not as far as "banking business". It is a modest amendment. I was tempted to return to the whole business of including the words "bank" and "banker". "Banking business" is not such a deceptive description for a licensed deposit-taker to use if he is conducting a banking business. None the less, it would be difficult, even if the amendment were acceptable, for such a body not to be able to describe itself as a bank or banker. However, the description would not be so restrictive as if the clause remained in its present form.
When the Bill is considered in another place, it may be that their Lordships will take account of what has been said not only in Committee but on Report. I shall listen with great care to what the Minister says about possible Government objections to an amendment such as No. 19 that would allow a licensed deposit-taker to use the term "carrying on a banking business".
If we draw the conditions of clause 36 so tightly that members of the licensed sector are not able to describe their activities properly and are not able to obtain an equivalent status with foreign competition on a similar level, we shall possibly be sowing the seeds for the destruction of the system upon which the Bill is based.
If the system breaks down and proves unworkable in practice, nothing will have been gained for the Government, for the Bank of England, for the recognised sector, for licensed deposit-takers or for those who have placed deposits with licensed deposit-takers. I ask the Minister yet again whether he is confident that the licensed deposit-taking sector will be able to carry on successfully its existing businesses unless the restrictions in clause 36 are loosened.
The bodies concerned range from large companies—some of them finance houses that may in some circumstances be the subsidiaries of clearing banks—to small private companies conducting a banking business that have not been operating long enough to acquire sufficient reputation or standing. It may be that they do not qualify for other reasons to become recognised banks. All these bodies, from their different standpoints, will be dramatically affected by the terms of clause 36 if it proves workable in practice.
A licensed deposit-taker which is conducting a banking business and aspires to be a recognised bank may find it exceedingly difficult to cross the boundary if in the stages before it hopes to qualify it is so restricted that it cannot accurately describe what it is doing. That is a danger area. That would apply to an amendment stronger than the one that I have tabled. It would apply to the whole use of the words "bank" and "banker" as well as "banking business". However, the essence of the argument is the same, namely, that restrictions on the members of the licensed sector under clause 36 are so severe that many of them will not be able to operate as freely as they should. That is why this is one of the major areas of contention in the Bill. I hope that it is not too late for the Minister and his advisers to think again about the implications of clause 36.
8.45 p.m.
If we decide not to press the matter to a Division tonight, it will not be because we underestimate its importance. It will be because we know that there will in a sense be a further Report stage of the Bill in another place. There will, therefore, be perhaps a rather more extended opportunity for the matter to be raised again. But before it is raised again in those circumstances it is right for the House once more to consider the implications of the clause, and in particular to ponder anything that the Minister may have to say to justify the tightness with which the clause is drawn.

Mr. Denzil Davies: The hon. Gentleman has moved his amendment, as he has indicated on several occasions, on the basis that he is not happy with the way in which the Bill is drawn, in that the Bill prevents any body except a recognised bank from describing itself as carrying on a banking business.
The amendment seeks to allow licensed deposit-taking institutions to describe themselves as
carrying on a banking business".
The amendment as drafted, so I am advised, would allow practically any body to describe itself as
carrying on a banking business".
Even a bureau de change could do so, in the way that the amendment is drafted, although I accept at once that that is not the intention of the amendment.
As I said in Committee, if we were to extend the dispensation to the description of
carrying on a banking business
we would be going to the heart of the Bill, which is concerned with the distinction between recognised banks and licensed deposit-taking institutions. I do not feel that it is possible for an institution to say that it is carrying on a banking business without its being a bank. Indeed, the hon. Gentleman used words to that effect in his speech when he said that institutions are carrying on a banking business and are indeed banks.
It could be argued, in relation to clause 36(1), that if we were to delete the words
or is carrying on a banking business
the institution concerned would still fall foul of subsection (1), because it would


reasonably be understood to indicate that it was a bank or banker. Somebody who described himself as carrying on a banking business could reasonably be said to be indicating that he was acting as a bank.

Mr. Emery: The clause states quite clearly in subsection (1) that
no person carrying on a business of any description
may describe himself as a banker. I declare an interest. In my own company my financial director is a fellow of the Institute of Bankers. He has spent many years of his life as a banker. He is employed particularly because he gives certain banking advice. If professionally he is ever called upon, he is in the position of having the qualification of the Institute of Bankers, and he describes himself as a banker. Would he be debarred from doing so by the wording of the clause?

Mr. Davies: I should not have thought that in those circumstances that person could be said to be carrying on a business. I understand the hon. Gentleman to say that this person was the financial director. There has to be a business. Obviously, it is a question of fact, but I should not have thought that he was carrying on a business.
My argument is that the amendment goes to the heart of the Bill. I cannot really see the distinction between "a bank" and "a banking business". Once one accepts that argument, one has to look at the words "bank" or "banker" in the subsection itself.
As I said in Committee, we have reached a practical limit, or as far as we can go. We can say "banking services" without going as far as "banking business". Once we cross that threshold and go to "banking business", we are into the realms of a bank, and then we are into the debate as to whether the split is the right one. The split is based to some extent on present practice. We have been over the arguments previously.
Therefore, for that reason and for the technical reason that I have mentioned, I could not accept the amendment.

Mr. Emery: I see the argument that the Minister is propounding. There is a very great difficulty. Equally, I see the argument that has been put forward by my hon. Friend the Member for

Hitchin (Mr. Stewart), who has led so competently for the Opposition on the Bill.
I see that there is a kernal of assistance in that "banking services" has been excluded. I am inclined to say to my hon. Friend that the Opposition ought to see whether those who have made representations to us on the aspect of excluding the banking business would not be content to structure their presentation as carrying out banking services. That, indeed, is probably what they may well be doing.
The Minister has a fair point as regards the amendment. We seem to be crossing party lines fairly frequently this evening. The moment that one structures that one has a business which is banking, I do not quite see how one can exclude oneself from being a bank or a banker.
If my hon. Friend can present arguments to substantiate any feeling that he may have that the amendment must be pressed, I shall listen carefully to what he has to say.
However, rather than press the amendment, I believe that we should go back to the people who have made representations to us to see whether the points they have made would be covered by "banking services" as opposed to "business".

Mr. Ian Stewart: When I moved the amendment, I said that I was not sure that it was in a condition in which it either should or could be pressed. However, the further debate that we have had on the very sensitive area of definitions of banking, banking business and so on has not been without its value. It would have been very difficult for anyone to draft a suitable amendment to widen the freedom within the restrictions in the clause. I know that the Minister and his advisers spent a great deal of time thinking about the precise wording of Government amendment No. 119 in Committee—which is now subsection (4). I am perfectly well aware of the drafting difficulties of making small adjustments in such a dangerous area. For that reason, if for no other, it would not be right to press the amendment.
However, I am not so sensitive as the Minister about the opportunity for using banking descriptions. It is at the heart of the Bill. It is an administrative matter.


It is certainly not a party political matter. Looking at it as objectively as possible, however, it seems to me that it is not such a ghastly thing if those who are carrying on a banking business are allowed to say that they are doing so. The difficulty of the clause as it is drawn is that it is always possible to produce a tight restriction. The tighter the restriction, the easier it is to draft it.
I rather fear that, because of the difficulty in drawing a boundary between the use and the non-use of permissible banking names, refuge has been taken behind the expedient of using the narrowest definition and not the wider definition which is actually required by the circumstances of the case.
For the reason that I advanced earlier, I beg to ask leave to withdraw the amendment in the hope that there will be further stages of the Bill at which this crucial aspect can receive further attention.

Amendment, by leave, withdrawn.

Mr. Ian Stewart: I beg to move amendment No. 20, in page 38, line 32, leave out second 'the' and insert such'.
This amendment proposes a small adjustment to the subsection that was inserted by the Government in Committee. It is designed to clarify the position so that only banking services can be described as banking services by licensed institutions that are able to take advantage of subsection (4). This was a small point that I raised in Committee. I do not know the result of the Minister's deliberations, but if he is anxious for precision it may well be proper for him to accept the amendment.

Mr. Denzil Davies: I believe that the amendment would be over-restrictive. It seeks to freeze the list of services in schedule 2. But, of course, that list is not meant to be exhaustive. Further banking services may be developed in future which are not covered by schedule 2, and it would be equally wrong to prevent a licensed institution from developing banking services.
We debated this matter in Committee. The hon. Gentleman rightly said that banking and financial institutions develop, and that there is a danger when legislating of preventing natural develop-

ment in the future. I think that I will use his argument against him, although I have others as well. For that reason, I cannot recommend the House to accept the amendment.

Mr. Stewart: By leave of the House, Mr. Deputy Speaker, may I say that the Minister has a fair point, but I think that I also had one. Perhaps I should have suggested that the subsection should read "to any banking services provided by it". But I do not want to continue this semantic discussion, and, therefore I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Denzil Davies: I beg to move amendment no. 22, in page 39, line 24, at end insert—
(7A) Subsection (1) above does not pro hibit the use by a licensed institution which has its principal place of business in another member State of the name under which the institution carries on business in that member State if the name is used in immediate conjunction with the description "licensed deposit taker" and, where the name appears in writing, if that description is at least as prominent as the name.'.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this we may take Government amendments nos. 24 and 25.

Mr. Davies: This amendment is consequential on the deletion of the old clause 35(2). This occurred as a result of debates in Committee, when the Committee accepted that a non-EEC financial institution should not be allowed to describe itself as a "bank" if it was a licensed deposit-taking institution.
In effect, the amendment is consequential on that vote in Committee, except that we have taken the opportunity to redraft it. Now an EEC body which will be able to call itself a "bank", because of the EEC directive, will immediately after its name have the description "a licensed deposit taker" if it does not qualify as a recognised bank in the United Kingdom. That will be displayed prominently after the name. To some extent, that is an improvement on the original legislation.
For example, any body incorporated in France which calls itself a "bank" but which does not qualify as a recognised bank in this country will have to state immediately after its name the fact


that it is a licensed deposit-taker. That at least will provide some safeguard in respect of competition with British institutions.
Amendments nos. 24 and 25 are similar except that they apply to a representative office where it does not take deposits. The amendment amends the original clause again as a result of that decision of the Committee.

9.0 p.m.

Mr. John Moore: A couple of comments are relevant at this juncture because, as the Minister of State quite fairly said, we had a lengthy debate in Committee on this whole clause. It might be interesting for those hon. Members who were not present in Committee to glance at this clause, which was clause 35 in Committee. They will see that an inordinate number of amendments have been brought in at this late stage. It is clearly a clause of great significance. It concerns the degree to which the Minister of State argued in Committee, quite rightly, on the importance of the use of the word "bank".
One of our difficulties is that we have had this amendment for 36 hours only and have not had an opportunity to take soundings and discuss what is obviously an important factor concerning the relative competitive position of EEC member State institutions which will not be recognised banks but will be licensed deposittakers, in comparison with the competitive position of similar British institutions.
I call the attention of the House to what was discussed in Committee, because it is important. The Minister of State quite rightly said that we won, in a key division in Committee, the withdrawal of such advantages that non-EEC member State banks and EEC member State banks had in comparison with licensed deposit-taking institutions in the United Kingdom. What we have now done is to restore the EEC banks. I hope that in another place this can be explored at some length because we have created almost an absurdity. That is understandable. I understand the Minister of State's position. He is seeking to put back, according to the directive, the EEC member State banks.
But let me try to illustrate what I think has now occurred. This is only on a first reading, and we have had no time

to scrutinise this matter. Suppose that an EEC bank, not capable of being described as anything other than a licensed deposit-taker in the United Kingdom, seeks to do business in the United Kingdom in competition with similar United Kingdom institutions. Let us suppose that it is called a "respectable bank". The term "respectable bank" becomes "respectable bank/licensed deposit-taker". It could be suggested that that almost adds a further degree of respectability and credibility to the institution as opposed to a limitation. It may be absurd, but it could equally be said "Why do we not call it "respectable bank—not a recognised bank, but a licensed deposit-taker?" That is what it is according to the character of the legislation. In that way we would not have deprived it of its rights under the EEC legislation of describing itself as a bank, while under our own new banking legislation it would be a licensed deposit-taker.
I understand the Minister of State's dilemma, but I think that more reflection is needed because we are likely, with the acceptance of this amendment, to put a greater degree of respectability or a greater degree of commercial advantage —not to put it too strongly—on foreign institutions as opposed to United Kingdom institutions. We are trying, in many ways, to reconcile the irreconcilable, in so far as "bank" is an important word. I should have thought that in another place we could do even better in our choice of words. I am not suggesting that they should be in the category "respectable bank—not a recognised bank but a licensed deposit-taker", but at least we ought not to part finally from this clause without ensuring that we do not put a foreign institution in a position of advantage vis-a-vis British licensed institutions and to some extent create the possibility of disadvantage to United Kingdom depositors. I do not think that it is a very satisfactory position for us to be in. I hope that the Minister of State will enable us to return to the matter, if possible, especially after discussions in another place.

Mr. Denzil Davies: No doubt the hon. Member will return to this point. I must point out that this has occurred as a result of hon. Members not accepting my arguments in Committee. Had the Committee accepted my arguments, as it


usually does, we would not be in this turmoil. I await with interestto see whatever amendments the hon. Member tries to put down to resolve this state of affairs. It is not quite as easy as hon. Members thought at one time.

Mr. John Wells: Will this rule apply to all foreign banks in whose British name the word "bank" does not occur? There are a large number of highly reputable, large and middle-sized foreign banks trading in the City of London—I have in mind a number of Spanish institutions—in whose name the word "bank" does not occur. Let us imagine the case of a bank calling itself "Respectable Company Limited", which everyone would recognise to be a bank in its national State. Would it have to have the words "Licensed Deposit Taker" tacked on to its name when it traded in the United Kingdom?

Mr. Davies: No. We are concerned with foreign institutions which use the word "bank" in their name. Under the original provisions of the Bill we decided that they would be allowed to use the word "bank", although the Bank of England might not designate them as recognised banks. The Committee took exception to that and said that it was unfair to British institutions which would not be allowed to use the word "bank". Then the Committee accepted an amendment to confine that to EEC countries. We could not do otherwise because of the directive. Therefore, our position at the moment is that an EEC bank which wants to use the word "bank" in its name but which is not recognised by the Bank of England will have to describe itself as a licensed deposit-taker. The problem arises with the use of the word "bank".

Amendment agreed to.

Mr. John Moore: I beg to move amendment no. 23, in page 39, line 24, at end insert—
'(7A) Subsection (1) above shall not prohibit a stockbroker or a dealer in securities licensed under the Prevention of Fraud (Investments) Act from describing himself as an investment banker or from describing his business as "investment banking" where in the context in which such description is used it refers or would reasonably be understood to refer to transactions concerning securities.'.

This is an important point. Without seeking to disturb the tranquillity of our discussions, I think that the Minister seems quite genuinely and legitimately to be unaware of the point we have been trying to make. I can only deduce this from the comments that he made in Standing Committee on clause 36 in relation to the term "investment banking". It is important to get on the record the very important distinction relating to this term, especially in so far as it might seek to create difficulties for British, as opposed to foreign, institutions.
I declare an interest as I am the chairman of an investment banking institution but a foreign-owned one, and to that extent I am speaking against my own personal commercial interests. However, on this matter we must put the interests of British institutions first. We are liable to create difficulties for them.
It is crucial for the House to know that in banking there is a functional area called investment banking where specifically in many cases much of the activity is disconnected from deposit taking. It is important to describe why. Essentially the reasons are linked with the changes in banking structure in the United States in the late 1920s, 1930s and into the 1940s which related to the successful attempts to break up the monopolistic position that existed in that country between corporate or investment banking, on the one hand, and commercial banking, on the other. Those activities were segregated so that institutions could not be involved in both sorts of banking. That is, I accept, a simplistic description of the history of he matter. The reason why it is important to our debates and germane to this part of the Bill is that in so many of those areas the United States is a dominant feature in the world investment banking scene.
The Minister of State seemed in Committee to concern himself more with stockbroking activities. I do not suggest that there are not investment banking institutions that are not connected with stockbroking as well as with other investment banking activities, but that is not the prime area with which we are concerned. An institution in the United Kingdom or overseas could be involved in investment banking without having an involvement in stockbroking. It may be involved in underwriting new issues, dealing in the


Euro-dollar market, whether in a primary or secondary sense, or in advising corporations involved in private placements.
It is crucial to remember that we are trying to concern ourselves with the ability of British institutions to compete with foreign institutions. There is a series of firms, such as Goldman Sachs, none of which has "investment banking" in its title but all of which, because of their dominance in the United States market and their ability to communicate there through publicity and advertising, are very well known for their investment banking functions.
On this side of the Atlantic, a United Kingdom institution may be seeking to do business in investment banking in competition with such organisations. The United Kingdom institution may not be involved in deposit-taking and may want to establish its investment banking activities in the United Kingdom in order to provide jobs and to add to the already dominant position of the United Kingdom as a financial and banking centre.
The world of investment banking is a market of great mobility. The organisation of the market does not have to be in any one place. With existing communications, it could be in Frankfurt, Bonn, Paris, Geneva, Zurich or London. A marginal distinction creating a disadvantage could lose for the United Kingdom and our institutions the possibility of an organisation establishing its headquarters or its European headquarters in the United Kingdom. That is an important issue for many British institutions.
What have we been told since the Committee stage about the ways in which a United Kingdom institution can or cannot communicate its ability competitively with similar United States institutions when it seeks the business of Los Angeles or companies in other American cities for which it wishes to raise money in, say, the Euro-dollar market? In his letter of 12 February, the Minister of State said:
I have looked again at the use of the term 'investment bankers' and see no reason to alter what I said in Committee. It is relevant that nothing in the Bill prevents an institution based in London from describing itself as an investment banker abroad.
An institution in London is reaching the stage of absurdity where one of its members visiting Los Angeles or San Francisco can give a business card or write

on a piece of stationery with the title "investment banker" describing his capacity or the capacity of his organisation, but when seeking to do business with overseas corporations visiting London, or even when writing from London, he is unable to use the title "investment banker" on his stationery. We are clearly producing a potential disadvantage for United Kingdom institutions.

9.15 p.m.

Mr. Denzil Davies: It is the American position which is absurd in describing as bankers people who by no stretch of the imagination are bankers.

Mr. Moore: With respect, we live in the real world and I should have thought that we were seeking to create legislation which would enable our organisations dealing in a world which now performs a function known as "investment banking" to compete on all fours. Whether the dominant factors in investment banking are following our traditions is irrelevant.
We have not heard a sound argument from the Minister to counter our propositions. If there is a sound argument which does not limit the intention of the Bill in seeking to protect depositors, we understand it. But, essentially, we say that we are not putting on all fours with its overseas competitors a United Kingdom institution which seeks to provide a different kind of banking service from those of the clearing banks seeking deposits. The investment banking institutions are quite different, and I do not feel that we have had the beginning of an answer. I hope that the Minister will make one in response to my comments tonight.

Mr. Denzil Davies: The answer is the same as the one which I gave in my intervention and the one which I gave in Committee. As I understand it, a banker is someone who at least takes deposits. I am sure that we can agree about that. We had long arguments in Committee about what a banker was.
For someone who does not take deposits and who merely carries out the corporate finance side of merchant banking to be described as a "banker" is absurd. I quite understand that this is investment banking in the United States, but really it is the American description which is the absurd one. To call a body which is merely giving financial advice,


acting as an underwriter and arranging new issues a "banker" seems absurd, and I do not think that we should legislate for an absurdity.
There are plenty of problems in the Bill without going further and saying "Here is someone who does not take money at all and who possibly does not lend money, either, but is merely giving financial advice, and we believe that he should be described as a 'banker' in this country". What happens in the United States depends on United States law. If a British institution of this type is operating in the United States, it can call itself an investment banker according to American law. But we are framing the law of the United Kingdom.
After all our debates about the meaning of "banker" and "banking", it would be absurd for us now to say that someone who does not even take deposits should be allowed to call himself a banker.

Mr. Peter Brooke: This is only my second intervention in the deliberations on this Bill, and both have come late in its stages.
I attended the Second Reading debate, when I held a kind of watching brief on behalf of certain of my constituents in case any rude comment was made about them. I intervened briefly in the speech of the hon. Member for Thornaby (Mr. Wrigglesworth) when I asked him about the Edge Act. The hon. Member is not here, so I feel a little unkind about saying it, but the record shows that perhaps he did not fully understand my question. The Edge Act is relevant to a degree to what we are discussing in this amendment. Therefore, I hang my second interjection on the hook of the first.
I was unlucky in that in the week in which we took the Second Reading of this Bill we also took the Second Reading of the Companies Bill and I was selected to serve on the Standing Committee which is considering the Companies Bill and, therefore, did not have the opportunity to serve on the Committee stage of this one. However, I am perhaps unique amongst those hon. Members present who did not take part in the Committee stage in having read the report of the proceedings with the greatest

possible assiduity. I must say that it is a great deal more interesting and exciting than the Companies Bill. One or two of the speeches—I remember especially a speech by the hon. Member for Stoke-on-Trent, Central (Mr. Cant)—seemed to cover the ground at great length, but they have made extremely good reading and they are valuable to anyone coming to the Report stage in this way.

Mr. Moate: My hon. Friend is not unique in not having served on the Standing Committee, but I am sure that he is unique if he has studied the report of the Committee's proceedings with assiduity.

Mr. Brooke: It is clear from a reading of the report of the Committee proceedings that the case from this side of the House has been handled with extreme competence. I am full of admiration. I have not read the letter from the Minister of State to which my hon. Friend the Member for Croydon, Central (Mr. Moore) referred. I am at some disadvantage intervening on this amendment without seeing it. However, having read what was said in Committee and in listening to the debate, I feel we are in some danger of making fools of ourselves if heed is not paid to the amendment.
Those of us who have spent our lives doing business on both sides of the Atlantic are aware that there are alternative languages and vocabularies. By and large, it does not matter. It is possible to explain that a prep school in one country is different from a prep school in another. At the same time, my hon. Friend the Member for Croydon, Central is right to say that the phrase "investment banker" is widely used in the United States to describe the people to whom he makes reference. I make no apology for intervening on behalf of my constituents in the City who have to compete in an international world and not a purely domestic world.
I have spent my professional life outside this House in a consulting firm. When we set up our office in the United Kingdom in 1961, we were required to state on our letterhead that we were licensed. As an activity that had started off in the United States, we had the greatest difficulty in persuading the licensing authority that we should be able to state our licence in a particular form of words which would not be misleading


on both sides of the Atlantic. We eventually did so but it took an enormous amount of time.
Following that experience, I have great sympathy for those who would be affected if the phrase "investment banker" was ruled out at this stage. It would be singularly unfortunate if the City of London, which has prospered and thrived over the last 30 years in circumstances of extreme foreign exchange control, was to be shackled by semantic differences of this sort.
I fear that the Minister does not understand the issues being put to him. An elaborate amount of debate has occurred on the word "bank", which is also affected by directives from the European Community.
This issue applies to the United States rather than to the United Kingdom. My colleagues involved in consulting would be deeply surprised if, as a consequence of the Bill, it was not possible to use the term "investment banker" in the common patois way it has been used across the Atlantic. The Minister of State says that the American situation is absurd. Perhaps that it right. The fact remains that it is a reality. That is the manner in which we conduct our affairs. The City of London does a remarkable job in competing in that international world, given the limited financial resources of this country in terms of economic strength. It would be unfortunate if the City of London, which has built up a reputation over many years, was to be hobbled by a restriction of this sort. I strongly support my hon. Friend for Croydon, Central in bringing this amendment back to the House on Report.

Mr. Ian Stewart: I do not expect the Minister to make a further reply but I want to make two points before we leave this debate. The first is a technical one. My hon. Friend for Croydon, Central (Mr. Moore) quoted from the letter of 12 February, which, unfortunately, my hon. Friend the Member for the City of London and Westminster, South (Mr. Brooke) has not seen, in which the Minister says:
It is relevant that nothing in the Bill prevents an institution based in London from describing itself as an investment banker abroad

That may be the case, but it is not how I read clause 36(1). That subsection says:
… no person carrying on a business of any description in the United Kingdom"—
other than certain exceptions—
may use any name or in any other way so describe himself".
It does not say that no one "may in the United Kingdom" use any name. If a representative of a business in this country went to North America, I would think that that description still applied. I raise that point so that the Minister may give it thought.
The Minister is not sufficiently aware of the difficulties which confront those in British firms who have to take the world as it is. Investment banking is not a form of banking as "banking" is defined in the Bill, but that is the fault of the Bill.

Mr. Denzil Davies: It is not banking by the ordinary common rules, either.

Mr. Stewart: I was just about to say that technical terms are often invented in which all the parts are not strictly logical in the original sense of the words used, but this term is used widely. I was taught at school that the Holy Roman Empire was neither holy, Roman nor imperial, but no one has thought of calling it anything else.
If a term such as "investment banking" exists in international business, we should not needlessly put our nationals at risk by refusing to use it. This is another example of the Government's excessive preoccupation with terminology rather than reality.

Amendment negatived.

Amendment made: No. 24, in page 39, line 27, leave out
'which consists of a name'.

No. 25, in page 39, line 29, leave out from 'Kingdom' to 'and' in line 30 and insert
'if the name is used in immediate conjunction with the description "representative office" and, where the name appears in writing, if that description is at least as prominent as the name'.—[Mr. Denzil Davies.]

Caluse 39

REPRESENTATIVE OFFICES OF OVERSEAS DEPOSIT-TAKING INSTITUTIONS

Mr. Emery: I beg to move amendment no. 26, in page 43, line 23, leave out '£1,000' and insert '£5.000'.
I was under the impression that the Report stage was likely to be concluded by 8 p.m. and I am already about an hour and a half late for an engagement. Therefore, as I thank the Minister for consideration that he has given our amendments, I also apologise for the fact that I shall not be speaking on Third Reading.
The amendment deals with penalties for representative officers of foreign firms which decide to set up an office in Britain and which are deposit-taking institutions overseas. We had a similar debate in Committee, when the Minister agreed to look at the matter.
The amendment increases the size of the fine for anyone who does not comply with this clause and deal with the registration in time. At the moment the fine to be £1,000 if the registration has not made within a month of the establishment of the office. An institution has give written notice to the bank within that period.
I am inherently suspicious. Any properly constituted body which is going to set up a representative office in London or elsewhere in this country will do so only after considerable thought and planning. It will not do so overnight. It should and will discover the regulations, customs, and so on, of the financial institutions of this country well before that office is established.
9.30 p.m.
If a company has not registered within 30 days, there can be only two conclusions—either it is darned inefficient, which is worrying, or it has some reason for not doing so. I shall not bore the House with all the possible intents.
There can be no justification for a company not registering within the period. If a firm is inefficient it should not be registered at all. If it does not register for intent which we would not applaud, fine should be much more than £1,000, even if it is £1,000 per day. That would

mean that a month's delay could lead to a fine of £30,000.
I am not sure that the courts would impose such a fine. My information is that they would not. Even if the courts did impose such a fine, the type of organisation that would not register because of an evil intent would not worry about £30,000, and might not even worry much about £150,000, which is the cumulative effect of a fine of £5,000 a day for a month. I am sure that there would not be many prosecutions, and I hope that the Minister will regard my proposal as an improvement to the Bill.

Mr. Denzil Davies: I have sympathy with the amendment. But there are other provisions in the Bill dealing with fines for not providing information. They are provided for in clauses 14, 16 and 17. The figure in those clauses is £1,000. That is not a conclusive argument, but the Treasury must consult the Home Office about fines. There must be some consistency in legislation. We could decide ourselves, but it would not be right to go against the advice of the Home Office.
The £ fine applies only to the first offence of failing to provide information. Under other provision in the Bill another £1,000 fine can be imposed for subsequent failures to provide information. The amendment would throw the other fines provisions in the Bill out of line. For that reason, I cannot accept it.

Mr. Emery: I am surprised at the Minister's reaction since he showed such staunch independence in Committee. I did not think that he would accept without question directives from the Home Office. I hoped that he would see that there is a considerable difference between fines involving internal information and those that might be imposed upon people from overseas who set up a registered office. In such cases business could be transacted and the organisation could disappear within a short period. There have been such examples.
I am sorry that the Minister will not accept the amendment. I hope that before the Bill goes to the House of Lords the Minister will accept the amendment and override the advice from the Home Office. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47

MEANING OF "DIRECTOR", "CONTROLLER" AND "MANAGER"

Mr. Ian Stewart: I beg to move amendment no. 27, in page 50, line 24, leave out "immediate".
The subsection to which this relates, subsection (4), contains a definition of the word "manager". It says:
(4) 'Manager', in relation to an institution means a person (other than the chief executive) employed by the institution who, under the immediate authority of a director or chief executive of the institution—
We had a brief debate in Committee on clause 41, relating to exemptions from the provisions of the Rehabilitation of Offenders Act. It is as a follow-through to that debate that I have tabled amendment no. 27 to raise once more, in a slightly weaker form, the amendment which I moved in Committee which sought to widen the term "manager" to cover all employees.
The Minister said that he did not feel that it was right to widen exemptions from the Rehabilitation of Offenders Act in that way because it would breach the whole purpose of the Act, which is that, after a time, spent convictions may be disregarded for the purposes of employment and for many other reasons. There remains a problem here because the exemptions for banking purposes are drawn narrowly.
We are dealing only with directors, controllers or managers. That would be all right if the word "manager" had its normal meaning, if it meant those who had full management responsibility. But in the larger institutions in particular the term "manager" covers a number of executives, many of whom may not be under the immediate authority of a director or the chief executive. Nevertheless, they may have senior managerial functions and it may be quite proper that the bank or employing institution should have the right to know about convictions, even if they are spent for other purposes.
Most of those who graduate to the position of director or chief executive will have moved in the recent past through the office of manager, and so on, where they may not have been under the immediate authority of a director. They

may have been one or two positions removed but, nevertheless, exercising genuine managerial functions.
I doubt whether the Minister will accept even this widening of the definition. It seems much narrower than the general one relating to "employee" which I moved in Committee. So far, the point is not quite dealt with. Perhaps, even though we may not be successful tonight, this is something which ought to be raised again, bearing in mind that there are further stages of the Bill when the Minister's thoughts can be taken further into account.

Mr. Denzil Davies: I do not think that there is a normal definition of "manager". This is part of the problem. The definition does not just apply to the legislation dealing with the rehabilitation of offenders. It goes wider and has to comprehend all the provisions in the Bill. We have received representations from the Finance Houses Association to the effect that the present formulation goes too wide, especially in respect of branches where each branch manager reports direct to the chief executive.
It could be said that in that case if there was immediate reporting that person would be a manager. Again, therefore, one must try to balance one against the other. As I have said, there is no natural meaning of the word "manager", but bearing in mind that we do not want the definition to be extended too widely the draftsman chose the word "immediate". and I have heard nothing to convince me to change that.

Amendment negatived.

Schedule 1

EXCEPTIONS FROM PROHIBITION IN SECTION 1

Mr. Denzil Davies: I beg to move amendment no. 29, in page 54, line 25 at end insert—
11A. A body of persons certified as a school bank by a trustee savings bank, the National Savings Bank or a recognised bank.
The amendment would exclude school banks from the Bill provided they were certified as such by a trustee savings bank, the National Savings Bank or a recognised bank. We dealt with this point in Committee. Provided that a


school bank is under the aegis of one of the banks specified, there is no reason to bring it within the Bill.

Mr. Ian Stewart: I wish to thank the Minister for moving the amendment, which is perhaps better than those that we sought to make in Committee. It achieves the same effect. I am glad that this improvement can be incorporated in the Bill.

Amendment agreed to.

Mr. Denzil Davies: I beg to move amendment no. 30, in page 54, line 27, leave out from beginning to "which" in line 31 and insert "Any other body".

Mr. Speaker: With this we are to take Government amendment no. 31, and amendment No. 32, in page 54, line 34 at end insert—
14A. The Letchworth Garden City Corporation.

Mr. Denzil Davies: The two Government amendments arise as a result of what the hon. Member for Hitchin (Mr. Stewart) said in Committee about the Letchworth garden city corporation. He pointed out that we had forgotten about the corporation, which has an unusual constitution and does not fit into schedule 1.
The draftsman has redrafted the schedule so as to include other bodies which might be similar, although I understand that Letchworth garden city corporation is unique. Nevertheless, there may be other similar such bodies in the future, and while the amendment does not spell out the name in the Bill, the redraft meets the point raised by the hon. Member.
Amendment No. 32, in the name of the hon. Member for Hitchin, seeks to spell out the name in the Bill, but since there might be other such bodies in future it is preferable to handle the matter as we propose.

Mr. Ian Stewart: I rise not as the Opposition spokesman on the Bill but as the hon. Member for Letchworth, and I do so to thank the Minister for having tabled amendment No. 30. It widens the definition in schedule 1 to cover the Letchworth garden city corporation most admirably. I hope that by choosing these words the Minister will have established

a precedent which will find its way into other legislation. In the Committee stages of other Bills, should I find myself participating, I shall in future not always have to table a separate amendment to protect the interests of the corporation.
Four out of six of the members of the corporation are appointed by the Secretary of State, while only one is appointed by the district council and one by the county council. Therefore, the provision that the majority of the members have to be appointed or elected by one or more local authority does not apply in this case.
The use of the words "any other body" which is enabled to issue a precept to a local authority, or to which a local authority can be required to contribute, covers not only the Letchworth garden city corporation but any other such anomalies of this kind in the future. Therefore, I hope that a similar wording will find its way into other Bills of this nature and save me much work in Committee in future years.

Amendment agreed to.

Amendment made: No. 31, in page 54, line 33, leave out from 'Scotland' to end of line 37.—[Mr. Denzil Davies.]

Schedule 2

MINIMUM CRITERIA FOR DEPOSIT-TAKING INSTITUTIONS

9.45 p.m.

Mr. Ian Stewart: I beg to move amendment no. 33, in page 55, line 33, leave out 'and' and insert 'or'.
This amendment takes up a point raised in Committee about the restrictive nature of the criteria set out in paragraph 2(2) of this part of the schedule, which defines the banking services which need to be provided for the purpose of qualification.
In Committee, my hon. Friend the Member for Honiton (Mr. Emery), who had originally raised the matter, was not available to move the amendment and to develop his argument, so it was left to me on that occasion to pick up one point which I felt needed further attention, namely, that there may well be cases in which it is not necessarily in the ordinary course of business that an institution would have both current and deposit account facilities. It might wish


not to have current accounts. Indeed, some of the recent directions of banking indicate that current accounts are not necessarily part and parcel of banking, other than retail banking, and that some merchant banking and financing activities may be conducted in another manner. The Minister of State said that he would give the matter further thought.
I have tabled the present amendment in order, I hope, to obtain a comment from the Minister. Perhaps he will even find it acceptable.

Mr. Denzil Davies: I take the point made by the hon. Member for Hitchin (Mr. Stewart). As he said, the amendment arises out of our discussions in Committee. I am quite happy to recommend its acceptance.

Amendment agreed to.

Schedule 5

THE DEPOSIT PROTECTION BOARD

Mr. Denzil Davies: I beg to move amendment No. 34, in page 62, line 22, leave out 'not more than'.
This amendment has the effect of requiring the Governor of the Bank of England to appoint three members from contributory institutions to the deposit protection board. As the Bill is at present drafted, he could appoint only one.
Here again, I gave an undertaking to the Committee that I would amend the Bill to this effect.

Mr. John Moore: Again, I thank the Minister of State. He has met the point made in Committee by my hon. Friend the Member for Hitchin (Mr. Stewart), and I thank him for taking it so completely.

Amendment agreed to.

Mr. Denzil Davies: I beg to move amendment No. 35, in page 63, line 27, after 'unless', insert '(a)'.

Mr. Speaker: It will be convenient to consider at the same time Government amendment No. 36.

Mr. Davies: These amendments meet a point made in Committee by the hon. Member for Hitchin (Mr. Stewart) which, I believe, also has the backing of the

accountancy bodies. It allows a person to be appointed as auditor by the board if he is authorised by the Secretary of State as having qualifications obtained abroad equivalent to membership of one of the bodies referred to in what will now be paragraph 4(4)(a). It meets a point raised especially in relation to American qualifications, for example. Such persons will now be covered by the amendment.

Mr. John Moore: I seem to be constantly on my feet thanking the Minister of State, and it is my pleasure to do so. Again, I thank him for taking note of the point that we made in Committee.

Amendment agreed to.

Amendment made: No. 36, in page 63, line 31, at end insert:
or
(b) he is for the time being authorised to be appointed as auditor of a company under section 161(1)(b) of that Act as having similar qualifications obtained outside the United Kingdom.'.—[Mr. Denzil Davies.]

Schedule 6

CONSEQUENTIAL AMENDMENTS

Mr. Denzil Davies: I beg to move amendment No. 37, in page 67, leave out lines 5 to 7 and insert—
'in paragraph 7 for the words "Companies which have satisfied the Secretary of State" there shall be substituted the words "Recognised banks, within the meaning of the Banking Act 1979, and any other companies as to which, immediately before the repeal of the Protection of Depositors Act 1963, the Secretary of State was satisfied"'.

Mr. Speaker: With this we are to take Government amendment No. 38.

Mr. Davies: The amendment provides saving provisions in respect of institutions that at present come within the definition of lending and saving institutions for the purpose of the Home Purchase Assistance Act and the Northern Ireland order but would be excluded by virtue of the amended definition, namely, those saving institutions that do not gain recognition under the Bill. The amendment ensures that there will be no break in continuity of savings notwithstanding the fact that an institution had not received recognition from the Bank of England. If there were a break, there would not be qualification under the assistance given under


the Home Purchase Assistance Act. We have ensured that there will be no problems arising from the Bill in respect of that legislation.

Amendment agreed to.

Amendment made: No. 38, in page 67, line 11, leave out from 'institutions)' to the end of line 14 and insert—
'in paragraph 4 for the words "Companies which have satisfied the Department of Commerce" there shall be substituted the words "Recognised banks, within the meaning of the Banking Act 1979, and any other companies as to which, immediately before the repeal of the Protection of Depositors Act (Northern Ireland) 1964, the Department of Commerce was satisfied"'.—[Mr. Denzil Davies.]

9.52 p.m.

Mr. Denzil Davies: I beg to move, That the Bill be now read the Third time.
We have had long and important debates on the Floor of the House and in Committee. I hope that we have covered most of the difficulties We have not been able to resolve all the difficulties or to reach agreement on them all, but we have given the Bill a good airing. I hope that it is a better Bill than when it went into Committee. I believe that it is.
I gave various undertakings in Committee. There is a slight problem concerning British overseas banks. We hoped to introduce an amendment on Report to deal with the problem. There were some difficulties on account of the EEC directive. The difficulties have now been resolved and a suitable amendment will be introduced in another place.
There was some discussion about the exemptions in schedule 1, the order-making provisions and stockbrokers and solicitors. We are now confident that we can put into the Bill, as opposed to proceedings by order, an exemption for stockbrokers. That will have to be done by amendment in another place. We were not able to complete our consultations in time to allow us to introduce an amendment on Report. As I have said, the exemption for stockbrokers will be written into the Bill. The exemption for solicitors will have to be introduced by order as it is not possible within the Bill to meet all the points that arise.
We have been in discussion with Lloyd's and the insurance brokers to ascertain whether there is any problem. We do

not yet know whether there is a problem because the information that we have received is not sufficient to enable us to form a judgment. If there is a problem, we shall exempt those bodies. The Law Society has agreed that we may exempt solicitors under the regulatory provisions.
The Bill protects depositors. It also provides a statutory form of supervision of banks and licensed deposit-taking organisations. It gives the Bank of England considerable discretion, as we have to in legislation, but it provides legislative backing, which is important, so that people may know what their rights are and so that they have some redress through the appeal provisions in the Bill against decisions taken by the Bank.

9.56 p.m.

Mr. Ian Stewart: First, I congratulate the Minister of State on the careful and constructive way in which he has handled the proceedings on this long and rather difficult Bill, both in Committee and on Report. The right hon. Gentleman has brought his considerable abilities to bear on it and it is the better for it. I thank him for the way in which he kept my hon. Friend and me and other members of the Committee informed of the Government's intentions as regards amendments and other matters and for keeping us similarly informed in the past few days.
As I said on a point of order at the beginning of today's proceedings, we have been in some difficulty because it was not clear until recently how the Government wished to proceed on a number of outstanding matters. The Minister has properly said on Third Reading that there were certain matters that it was not possible to cover by amendments in time for Report and that these matters could be and would be dealt with by regulation or by amendments when the Bill goes to another place.
One item which has received a good deal of comment during our proceedings is the letter to me from the Minister dated 12 February, which has been circulated to all members of the Standing Committee. It contains five pages of important comment on several points which were raised in Committee. I suggested in conversation that it would be helpful if such letters could be published as an annex to the report of Committee proceedings. It may very well be that


the rules of the House are such that only the spoken word can be reported. An alternative was suggested to me. It was that if I tabled a parliamentary question to the Chancellor of the Exchequer, asking for the text of the letter to be printed in the Official Report, it would be likely to receive a favourable answer. I have tabled such a question today and I hope that within a day or two the contents of this invaluable document will be available to other hon. Members and to those outside this House who may be interested in it.
I should also like to thank my hon. Friend the Member for Croydon, Central (Mr. Moore), who most gallantly took up the running with me part-way through the Committee stage, when I unexpectedly found responsibility for the Bill falling on my shoulders. He has been of the greatest possible help to me. In particular, I congratulate him on his first appearance at the Dispatch Box this afternoon. I thought that he conducted himself most excellently, and he has greatly assisted our deliberations on the Bill. I also extend my thanks to my hon. Friend the Member for Honiton (Mr. Emery), who brought his knowledge and ministerial experience to bear, both in Committee and today. They have both been of great help.
As the Minister said, the Committee and Report stages of the Bill have brought about some considerable improvements in the Bill. The most significant amendment that we carried in Committee was, I think, in regard to clause 35(2), where we dealt with the problem of foreign competition, whereby the free use of banking names was available to some branches of foreign businesses. By carrying that amendment in Committee I think that we have redressed the balance in favour of British-based firms in the banking sector. That was a useful amendment to have carried. Government amendments have also been tabled, and I am sure that the arguments so excellently advanced by my hon. Friends, as well as the representations which were made, have played a strong part in bringing this about.
The main amendments were, first, the amendment to clause 35, as it then was, now clause 36, on banking services. That, as I said earlier, although not going as far as I or many other hon. Members outside this place would think necessary,

is a considerable improvement for the licensed deposit-taking sector as compared with the way in which the Bill was first drafted. There was also the new clause, which is now clause 33, regarding the tax treatment of contributions to the deposit protection fund.
That was a matter which had caused anxiety to the banks, which felt that they might have to make their initial contributions to the fund without their being tax-deductible. It has, indeed, lessened the irritation felt by many banks that they have to have a physical fund as well as a strong system of supervision, backed up by guarantees of enormous figures, running into hundreds of millions of pounds. The fact that the contributions are now tax-deductible lessens that irritation. I do not feel that it was necessary to have a fund, but that was not the main point at issue, and we do not dispute that there should be the deposit protection scheme. It was a matter of the technical arrangements which involved the need for a fund.
We debated earlier today the matter of the Giro, and there was a close vote on that. There is a difference of emphasis between the two sides here, and I am sorry that, after further reflection, the Government still find themselves unable to put the Giro exactly on to all fours with institutions in the private sector. We have had that debate already and I do not, of course, wish to repeat it at this hour.
I should like to say a further word on what seems to be the main continuing problem raised by the Bill—the difficulty, for those who will fall into the licensed sector, with the restriction on banking names, discussed this evening under amendment No. 19.
I said in Committee—I repeat it now—that we realise that one has to have different tiers or categories whatever supervisory system is brought in. We have a two-tier system—

It being Ten o'clock, the debate stood adjourned.

Ordered,
That the Banking Bill may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Bates]

Question again proposed.

Mr. Ian Stewart: We recognise that some form of categorisation is essential if we are to have a system of banking supervision. In the Bill as it stands, there is a two-tier system. Although doubts were expressed on Second Reading, that is the system with which we have had to deal.
I think that it is perfectly acceptable  have two tiers for the purposes of supervision, but not for names and terminology. We have been over this ground earlier on amendment No. 19. I do not wish to repeat the arguments. However, I think that it may cause serious difficulties, perhaps in some cases a crippling handicap, to the business of certain licensed deposit-takers. The alternative to that is that the Bill may well be flouted in regard to this important pro-

SECONDARY PICKETING (ABOLITION)

Division No. 79]
AYES
[5.04 p.m.


Arnold, Tom
Gilmour, Rt Hon Sir Ian (Chesham)
McCusker, H.


Atkins, Rt Hon H. (Spelthorne)
Gilmour, Sir John (East Fife)
Macfarlane, Neil


Atkinson, David (B'mouth, East)
Glyn, Dr Alan
MacGregor, John


Awdry, Daniel
Goodhew, Victor
MacKay, Andrew (Stechford)


Baker, Kenneth
Goodlad, Alastair
Macmillan, Rt Hon M. (Farnham)


Bell, Ronald
Gow, Ian (Eastbourne)
McNair-Wilson, M. (Newbury)


Bennett, Sir Frederic (Torbay)
Gower, Sir Raymond (Barry)
Marshall, Michael (Arundel)


Benyon, W.
Grant, Anthony (Harrow C)
Mates, Michael


Berry, Hon Anthony
Grey, Hamish
Mather, Carol


Biffen, John
Grimond, Rt Hon J.
Mawby, Ray


Biggs-Davison, John
Grist, Ian
Maxwell-Hyslop, Robin


Blaker, Peter
Grylls, Michael
Miller, Hal (Bromsgrove)


Boscawen, Hon Robert
Hall-Davis, A. G. F.
Mills, Peter


Boyson, Dr Rhodes (Brent)
Hamilton, Archibald (Epsom &amp; Ewell)
Monro, Hector


Brittan, Leon
Hampson, Dr Keith
Montgomery, Fergus


Brotherton, Michael
Hannam, John
Moore, John (Croydon C)


Buchanan-Smith, Alick
Harvie Anderson, Rt Hon Miss
Morgan, Geraint


Budgen, Nick
Haselhurst, Alan
Morgan-Giles, Rear-Admiral


Carlisle, Mark
Hastings, Stephen
Morris, Michael (Northampton S)


Chalker, Mrs Lynda
Havers, Rt Hon Sir Michael
Morrison, Hon Charles (Devizes)


Channon, Paul
Hawkins, Paul
Morrison, Hon Peter (Chester)


Clark, Alan (Plymouth, Sutton)
Hayhoe, Barney
Neave, Airey


Clark, William (Croydon S)
Hicks, Robert
Nelson, Anthony


Clegg, Walter
Holland, Philip
Neubert, Michael


Cormack, Patrick
Hooson, Emlyn
Newton, Tony


Costain, A. P.
Howe, Rt Hon Sir Geoffrey
Nott, John


Crawford, Douglas
Howell, David (Guildford)
Oppenheim, Mrs Sally


Crouch, David
Hunt, David (Wirral)
Page, John (Harrow West)


Dodsworth, Geoffrey
Hunt, John (Ravensbourne)
Page, Rt Hon R. Graham (Crosby)


Doig, Peter
Hurd, Douglas
Page, Richard (Workington)


Douglas-Hamilton, Lord James
James, David
Paisley, Rev Ian


Drayson, Burnaby
Jenkin, Rt Hon P. (Wanst'd&amp;W'df'd)
Penhallgon, David


Dunlop, John
Jessel, Toby
Percival, Ian


Durant, Tony
Jones, Arthur (Daventry)
Peyton, Rt Hon John


Eden, Rt Hon Sir John
Jopling, Michael
Prentice, Rt Hon Reg


Emery, Peter
Joseph, Rt Hon Sir Keith
Price, David (Eastleigh)


Eyre, Reginald
Kaberry, Sir Donald
Prior, Rt Hon James


Fairgrieve, Russell
Kitson, Sir Timothy
Pym, Rt Hon Francis


Fell, Anthony
Knight, Mrs Jill
Raison, Timothy


Fisher, Sir Nigel
Knox, David
Rathbone, Tim


Fletcher, Alex (Edinburgh N)
Lawrence, Ivan
Rees, Peter (Dover &amp; Deal)


Forman, Nigel
Le Marchant, Spencer
Rees-Davies, W. R.


Fowler, Norman (Sutton C'f'd)
Lester, Jim (Beeston)
Renton, Rt Hon Sir D. (Hunts)


Fox, Marcus
Lewis, Kenneth (Rutland)
Renton, Tim (Mid-Sussex)


Fraser, Rt Hon H. (Stafford &amp; St)
Lloyd, Ian
Rhodes James, R.


Freud, Clement
Luce, Richard
Ridley, Hon Nicholas


Fry, Peter
MacCormick, Iain
Ridsdale, Julian


Gardner, Edward (S Fylde)
McCrindle, Robert
Rifkind, Malcolm

vision. I hope that that will not be so and that it will all work out. But clearly, if it does not work out, a considerable review will have to take place after experience of the operation of the Bill, and it may well be that substantial changes will have to be brought forward.

This is not the final stage in the parliamentary passage of the Bill. As has been pointed out, the discussion on the Bill in the other place will have to pick up some points which we have left uncovered. However, the Bill leaves this House at this stage in a better condition than that in which it came before us. I congratulate the Minister of State and thank all my hon. Friends for the contributions they have made to ensuring that the Bill does so.

Roberts, (Michael (Cardiff NW)
Steel, Rt Hon David
Watt, Hamish


Ross, Stephen (Isle of Wight)
Steen, Anthony (Wavertree)
Weatherill, Bernard


Ross, William (Londonderry)
Stewart, Rt Hon Donald
Wells, John


Rossi, Hugh (Hornsey)
Stewart, Ian (Hitchin)
Welsh, Andrew


Rost, Peter (SE Derbyshire)
Stradling Thomas, J.
Whitelaw, Rt Hon William


Sainsbury, Tim
Tapsell, Peter
Whitney, Raymond


St. John-Stevas, Norman
Taylor, Teddy (Cathcart)
Wiggin, Jerry


Shaw, Giles (Pudsey)
Tebbit, Norman
Winterton, Nicholas


Shersby, Michael
Thatcher, Rt Hon Margaret
Wood, Rt Hon Richard


Sims, Roger
Townsend, Cyril D.
Young, Sir G. (Ealing, Acton)


Skeet, T. H. H.
Trotter, Neville
Younger, Hon George


Speed, Keith
Viggers, Peter



Spence, John
Wakeham, John
TELLERS FOR THE AYES:


Sproat, Iain
Wall, Patrick
Mr. Peter Temple-Morr's and


Stanbrook, Ivor
Walters, Dennis
Mr. Roger Moats.


Stanley, John
Warren, Kenneth





NOES


Allaun, Frank
Garrett, W. E. (Wallsend)
Murray, Rt Hon Ronald King


Anderson, Donald
George, Bruce
Newens, Stanley


Archer, Rt Hon Peter
Gilbert, Rt Hon Dr John
Noble, Mike


Armstrong, Ernest
Gould, Bryan
O'Halloran, Michael


Ashley, Jack
Graham, Ted
Orme, Rt Hon Stanley


Ashton, Joe
Grant, George (Morpeth)
Palmer, Arthur


Atkins, Ronald (Preston N)
Grant, John (Islington C)
Park, George


Atkinson, Norman (H'gey, Tott'ham)
Grocott, Bruce
Parker, John


Bagier, Gordon A. T.
Hamilton, James (Bothwell)
Pavitt, Laurie


Barnett, Guy (Greenwich)
Hamilton, W. W. (Central Fife)
Perry, Ernest


Bates, Alf
Harrison, Rt Hon Walter
Radice, Giles


Benn, Rt Hon Anthony Wedgwood
Hart, Rt Hon Judith
Rees, Rt Hon Merlyn (Leeds S)


Bishop, Rt Hon Edward
Hattersley, Rt Hon Roy
Richardson, Miss Jo


Blenkinsop, Arthur
Heffer, Eric S.
Robertson, George (Hamilton)


Boothroyd, Miss Betty
Home Robertson, John
Roderick, Caerwyn


Bradley, Tom
Howell, Rt Hon Denis (B'ham, Sm H)
Rooker, J. W.


Brown, Hugh D. (Provan)
Hoyle, Doug (Nelson)
Ross, Rt Hon W. (Kilmarnock)


Brown, Robert C. (Newcastle W)
Huckfield, Les
Rowlands, Ted


Buchan, Norman
Hughes, Robert (Aberdeen N)
Sedgemore, Brian


Callaghan, Jim (Middleton &amp; P)
Hunter, Adam
Shaw, Arnold (Ilford South)


Campbell, Ian
Irving, Rt Hon S. (Dartford)
Sheldon, Rt Hon Robert


Canavan, Dennis
Janner, Greville
Short, Mrs Renée (Wolv NE)


Carmichael, Neil
Jay, Rt Hon Douglas
Silkin, Rt Hon John (Deptford)


Cartwright, John
Jeger, Mrs Lena
Silverman, Julius


Castle, Rt Hon Barbara
Jenkins, Hugh (Putney)
Skinner, Dennis


Clemitson, Ivor
Johnson, James (Hull West)
Smith, Rt Hon John (N Lanarkshire)


Cocks, Rt Hon Michael (Bristol S)
Judd, Frank
Snape, Peter


Coleman, Donald
Kelley, Richard
Spriggs, Leslie


Cowans, Harry
Kerr, Russell
Stallard, A. W.


Cox, Thomas (Tooting)
Lambie, David
Stewart, Rt ton M. (Fulham)


Craigen, Jim(Maryhill)
Lamborn, Harry
Stoddart, David


Crowther, Stan (Rotherham)
Lamond, James
Strang, Gavin


Cryer, Bob
Latham, Arthur (Paddington)
Summerskill, Hon Dr Shirley


Davidson, Arthur
Lestor, Miss Joan (Eton &amp; Slough)
Taylor, Mrs Ann (Bolton W)


Davies, Bryan (Enfield N)
Lewis, Ron (Carlisle)
Thomas, Ron (Bristol NW)


Davies, Rt Hon Denzil
Lofthouse, Geoffrey
Tierney, Sydney


Davis, Clinton (Hackney C)
Loyden, Eddie
Tilley, John


Deakins, Eric
Luard, Evan
Tinn, James


Dean, Joseph (Leeds West)
McCartney, Hugh
Urwin, T. W.


Dempsey, James
McDonald, Dr Oonagh
Wainwright, Edwin (Dearne V)


Dewar, Donald
McElhone, Frank
Walker, Harold (Doncaster)


Dormand, J. D.
Macfarquhar, Roderick
Walker, Terry (Kingswood)


Douglas-Mann, Bruce
McGuire, Michael (Ince)
Watkins, David


Eadie, Alex
McKay, Allen (Penistone)
Watkinson, John


Edge, Geoff
Maclennan, Robert
White, Frank R. (Bury)


Ellis, John (Brig &amp; Scun)
Madden, Max
White, James (Pollok)


English, Michael
Marks, Kenneth
Willey, Rt Hon Frederick


Ennals, Rt Hon David
Marshall, Dr Edmund (Goole)
Williams, Rt Hon Alan (Swansea W)


Evans, Fred (Caerphilly)
Marshall, Jim (Leicester S)
Wilson, William (Coventry SE)


Evans, John (Newton)
Maynard, Miss Joan
Wise, Mrs Audrey


Fernyhough, Rt Hon E.
Meacher, Michael
Woodall, Alec


Fitt, Gerard (Belfast W)
Mellish, Rt Hon Robert
Woof Robert


Flannery, Martin
Mikardo, Ian
Wrigglesworth, Ian


Fletcher, Ted (Darlington)
Millan, Rt Hon Bruce
Young, David (Bolton E)


Foot, Rt Hon Michael
Mitchell, Austin (Grimsby)



Fowler, Gerald (The Wrekin)
Molloy, William
TELLERS FOR THE NOSE:


Freeson, Rt Hon Reginald
Morris, Rt Hon Charles R.
Mr. Robin Corbett and


Garrett, John (Norwich S)
Morton, George
Mr. George Rodgers.

Question acccordingly agreed to.

BANKING BILL

10.1 p.m.

Mr. Wrigglesworth: The Bill is a longoverdue measure. I have greatly welcomed the opportunity of being able to help its passage through the House. The Bill has been long overdue because there was a need to reassure public opinion about the supervision of banking after the collapse in the early part of the 1970s. The Bill helps to reduce the risk of abuses taking place. It will also reduce the risk of there being confusion, which has undoubtedly existed under the present rather complicated system of banking supervision.
I make only one point to the Minister. Although we have said in the Bill that the deposit protection board should make an annual report about its activities, we have not, as I understand it, insisted that the Bank of England shall make a report upon its activities and its responsibilities as laid down in the Bill. I hope that that will not mean that the Bank of England will not report upon the new responsibilities that it will have under the Bill. They are quite substantial responsibilities.
I hope that through the Bank of England Quarterly Bulletin we shall hear, on an ongoing basis, how the responsibilities are being discharged, and that in the Bank of England's annual report each year there will be a substantial report on the supervisory functions, how they are developing, how the Bank is carrying them out and any comments that the Bank cares to make, so that the Select Committee on Nationalised Industries can look at that area of the Bank's activities and, indeed, so that hon. Members may raise matters arising from the Bill in this Chamber.
I hope that the Minister will take that point on board. In the past, the Bank of England has been rather secretive—I have criticised it for this—about some of its activities. It would be unfortunate if an area as important as this were not given an airing by the Bank at least in its annual report. I hope that it will be more often than that.
I hope that the Minister will discuss this with the Governor of the Bank of England and ensure that an annual report of the Bank's discharge of its duties under the Bill is made.

10.4 p.m.

Mr. Moate: It seems to me that the House is tonight asked to give a Third Reading to a Bill of quite considerable significance. The Bill is a considerable milestone in the history of banking. It is certainly welcome to me in that it sets up what appears to be a very sensible framework of regulation for all the banks in this country and for other deposit-taking institutions.
The Bill is also significant because of the political background to it. It is a remarkable achievement, in view of the controversial political arguments that have raged about banking and the threats of banking nationalisation and the like which have emanated from certain quarters of this House, that the House of Commons is tonight—in an atmosphere of co-operation and in a constructive approach—putting on the statute book a moderate and sensible piece of legislation.
One hopes that this Bill, when it becomes an Act, will remain on the statute book in its present form and be successful for many years to come. I believe that it is a recognition by the Government of the effectiveness of our banking institutions. It is also a recognition by the Government of the outstanding role of the Bank of England.
One of the reasons why to me the Bill makes a great deal of sense is the role that it gives to the Bank of England, which has the role of paternalistic supervision over the banking sector. That is what makes the Bill sensible and acceptable. Indeed, very little is understood in the country about the great skill exercised by the Bank of England during the period of the lifeboat operation. I suspect that in times to come that will be seen as probably one of the most skilful operations in the history of banking. It was conducted with a great deal of sensitivity at little or no cost to the taxpayer, yet at the same time it preserved the competitiveness of the secondary banks of this country. That was a remarkable achievement, and it is right that it should be implicity recognised by the role given to the Bank of England in future in the supervision of all the deposit-taking and financial operations in this country.
There is one aspect of the Bill that gives me a little concern. I was not privileged to take part in the Committee


proceedings, and perhaps my concern has already been dealt with. From my reading of the debates that have taken place, it seems to me that it is still probable that some advantage is likely to be given to foreign banks with branches operating in this country. It seems to me that those banks are likely to satisfy less stringent criteria, which might have to be accepted by the Bank of England because of our international commitments, than banking operations in this country.
It is only when Bills such as this have operated for some time that we really know whether they are totally effective. It is still possible that in years to come we shall find some rather dubious branches of some dubious foreign banks springing up in some remote part of the country, purporting to be banks yet securing the protection of the deposit fund and thereby having an unfair competitive edge over British banks. I believe that that loophole still exists.
Part of the parentage of the Bill comes from the EEC directive on banking. At this stage I should emphasise that, although I am no fervent supporter of the EEC, I believe it to be very desirable indeed that the greatest uniformity of banking rules should be adopted throughout the Community. We want to see the maximum of fair competition between our financial institutions and the least amount of Government interference in the movement of capital and the freedom of banking competition within the Community.
It is that desire for fair competition which causes me concern about the deposit protection scheme. In that respect, I believe that the British banks will be burdened with a levy or cost which foreign banks operating in other parts of the EEC will not be burdened with.
To that extent, British banks are unfairly burdened and therefore we are diminishing their competitiveness, and not enhancing it. We are going much further than the EEC directive requires and even perhaps operating against the spirit of it. Nevertheless, the maximum competition is what we should be seeking. If this harmonises laws on banking throughout the Community, I think that makes it a great deal more sense.
During our earlier proceedings the Minister of State made a very helpful

concession towards small businesses. Despite that, protection schemes and licensing schemes of this kind are always in danger of becoming a charter for the establishment to protect existing institutions. In banking, as in all other areas, we must ensure that new organisations and innovators can take advantage of a situation and can create new competition and bring in new ideas.
What we must be certain of when we license and control is that we are not simply protecting the existing institutions and preventing new organisations and companies from introducing new services to the consumer. I hope that the Bill will not become a charter for the establishment and that we shall continue to see increased competition in the banking world. I hope also that this fairly moderate and sensible legislation before us will do that—act as a framework for sensible control without interfering with or dampening down much-needed competition.

10.12 p.m.

Mr. Brooke: The infectious amity that has surrounded this Bill has persisted this evening through the Report stage and Third Reading. My intervention will be extremely brief. Rather in the manner of the dodo in "Alice", members of the two Front Benches have, perfectly rightly, thanked and congratulated each other for their contributions to the Bill. Everything that I have read suggests that those comments are wholly justified.
Since a large number of my constituents will be among those institutions partly affected by this Bill, I should like to say a word of gratitude to those who worked on this Bill, making it a very much better Bill than it was when it first came before the House. I remember at the time of Second Reading a degree of disquiet about the advantages which appeared to be given to foreign banks, particularly in the context of their nomenclature. While I have not followed the progress of the Bill in Committee on a daily basis, as perhaps I followed the Test series in Australia, I am nevertheless extremely glad—and it obviously arose through cross-voting—that good sense persisted on the particular clause and amendment which affected that decision. It seemed to me to be the House of Commons at its best when it reached that conclusion.
I am genuinely grateful on behalf of my constituents in the banking community for all the work that has been done on the Bill, not only by the Minister but by all those concerned.

10.14 p.m.

Mr. John Moore: It seems to me that the mood of the House suggests that the lengthy Third Reading speech that I prepared would not be greeted with great applause by the House. Therefore, I shall put it to one side. The words of my hon. Friend the Member for City of London and Westminster, South (Mr. Brooke), and the sense of balance that he has about the things that are more important to him, will reflect very well for him at the polls. The cricketing scores are clearly a great deal more interesting to most sane and rational people than our debates. I shall just take one or two moments to touch on a few points which, though not carping, are small points of criticism that still linger in one's mind from our lengthy deliberations.
First, I do not think that any of us, whatever our view, can be satisfied about the character of the foreign banking institutions that are not recognised banks, or would not be under the Bill. None of us is terribly happy with this arrangement, and I hope that in another place we can come to some better form of words. We have managed, though we have not seen the amendments yet, to see stockbrokers, solicitors, Lloyd's and all the other small organisations of great importance brought in, and I would have thought that investment banking could equally be reconsidered at some stage.
Another small point is that I do not think any of us—and I am sure the Minister of State will allow me to include him—would be happy at the way in which in Committee we were not able to obtain data to allow us to assess the number of depositors in institutions throughout the land who have deposits in excess of £10,000. This was a crucial element in terms of the protection scheme. All of us, on both sides of the Committee, felt a little lacking in the absence of clear conclusive data.
Another point which I would have made at much greater length had there been time is one that we discussed at some length in Committee—the way in

which the Bank of England is able to act under the catch-all phrase of "the public interest". Many of us are rather uncomfortable about that. We must watch out for such catch-all phrases in Government legislation in future.
I am delighted about the innate assumption throughout our debates that because it was the Bank of England that was being asked to do the job of supervisory agent we could all rest a little easier. That sense of trust in that institution which permeated the Committee debates is an important and crucial feature. I was glad that my hon. Friend the Member for Faversham (Mr. Moate) also brought out the role of the Bank of England in the lifeboat crisis.
On a personal note, I thank the Minister of State and the Treasury. We hear a lot of criticism of the way in which the House of Commons conducts its duties in scrutinising legislation. This was an example of the House of Commons at its best, due to a great extent to the courtesy and kindness of the Minister of State. Beyond that, whether by accident or inadvertence, at some stage during our debates members of the Committee were each given a splendid set of cyclostyled notes from the Treasury. These notes analysed clause by clause and line by line certain parts of the Bill and showed serious and responsible thinking about the legislation.
I should like such sensible additions to be given to all those who seek to improve legislation in Committee. Obviously it puts many of us at a disadvantage if we have to rely on outside sources of information. These notes made our Committee's deliberations more sensible, and to that extent we would like to see this practice carried on with other legislation.
I thank my hon. Friend the Member for Hitchin (Mr. Stewart). It is an odd feeling for me to stand here at the Dispatch Box for the first time, so I thank my hon. Friend for his help and for the skilful way in which he led the Opposition in a very detailed and technical piece of legislation. We all respect him for the work he did.

10.18 p.m.

Mr. Denzil Davies: I should like to thank Conservative Members, especially the hon. Members for Hitchin (Mr. Stewart) and Croydon, Central (Mr.


Moore), for the very reasonable but penetrating way in which they have scrutinised the Bill. As a result of their efforts, the Bill is better, and I pay tribute to them.
I shall go over the main points of the Bill briefly. It establishes a deposit protection fund to protect people's deposits in banks. This is an innovation in this country and I believe that we shall see it developing in other countries. The hon. Member for Faversham (Mr. Moate) said that European countries did not have such a scheme, but European countries are beginning to show an interest—West Germany is already looking at this. I think that such a scheme will develop in the EEC, and it already exists to some extent in the United States. For the first time we are providing statutory protection for people up to a certain limit if their deposits are in banks or in licensed deposit-taking institutions.
The Bill also establishes the statutory framework for supervision to be carried out by the Bank of England. I believe that the old system of relying upon administrative controls is not right in the middle of the twentieth century. We needed a statutory backing. Once one starts doing that, there are difficulties of drafting because one does not want to become over-restrictive. That is why we have given discretion to the Bank of England, but we have also provided statutory backing.
My hon. Friend the Member for Thornaby (Mr. Wrigglesworth) asked that the Bank of England should be required to lay a report before the House. Clause 4 provides for a report from the Bank of England including not only the list of institutions that it has recognised and given licences to but a general synopsis on the way it operates its supervisory functions. For constitutional reasons, that report will be laid before the House by the Chancellor of the Exchequer and questions can be asked about it. It is important that accountability should come back to the House, at least for the general system of supervision
The hon. Member for Faversham touched on an important point when he said that the system must not become too establishment-oriented. Obviously we need competition in banking—but perhaps not too much competition. There is a danger in too much competition, but

there is also a danger in ossification and the establishment shutting others out. I do not suggest that that is likely to happen with the Bank of England operating the system, but we have provided a system of appeal from the decisions of the Bank in relation to recognition and licensing. It is important to have a final court of appeal so that newcomers do not think that the establishment is ganging up on them.
We also have in the Bill the controversial banking names provision. I appreciate the difficulties that that provision will cause. The trouble is that, as with all other legislation, we are not starting from scratch and we have a fairly open society for banking. In a smaller country it might be possible to say that any institution taking deposits could call itself a bank. But we operate in a worldwide environment and we have to start from the existing two-tier system. I appreciate the difficulties, but I do not believe that we had any alternative but to draw a distinction between banks and licensed deposit-taking institutions.
Those are the main points of the Bill. It is the first piece of banking legislation that we have had. We do not want to make legislation, in this area or in any other, too restrictive, but in the modern world we must have a legislative framework. We have tried to provide it sensibly and moderately.

Question put and agreed to.

Bill accordingly read the Third time and passed.

HILLINGDON LAW CENTRE

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

10.23 p.m.

Mr. F. P. Crowder (Ruislip-NorthWood): Nearly 500 years ago a statute was enacted in the reign of Henry VII which provided that
Every poor person … shall have … writs … therefore paying nothing to your Highness … and the Lord Chancellor shall assign … learned counsel and attorneys for the same without any reward taking thereof".
It was from that statute that the modem community law centres first came into being. The House will agree that a law


centre is entitled to find and use any remedy available at law for its clients, but, if it is in receipt of public funds, it is not entitled to show affiliation to any political party or to promote any party's programme.
For some years, my constituency, which lies within the London borough of Hillingdon, has felt serious concern about the activities of the Hillingdon law centre. Incidentally, I am glad to see my hon. Friend the Member for Uxbridge (Mr. Shersby) in his place at this late hour because his constituency also falls within that borough.
Although the councillors always supported the provision of a service of free legal advice and representation for the residents of the borough, the council is, naturally, unwilling to fund subversive and socially destructive activities under the guise of community work or educational work. I wish to emphasise that there is evidence of a political trend in this direction. Whereas it is most desirable for citizens to be aware of their rights and obligations under the law, the efforts of this law centre appear to he somewhat misdirected in certain instances.
Let me give an example. Not long ago, in that centre was to be found a poster headed "Trouble with social security?" That poster depicted an officer of the Department of Health and Social Security as a Nazi blackshirt with an SS armband. Naturally, such a representation was deeply offensive to the staff of the DHSS who work to help their fellow citizens who are in need, and, fa from helping those in need of assistance to seek it, it was calculated to deter them from taking their problems to the agency of government whose aim is to help them.
There was another instance. When we faced the trouble at Grunwick, the centre displayed posters urging support for the pickets who were acting to deny the company's employees who wished to work their right of freedom of action. To my mind, that constitutes political activity of a most reprehensible character within the centre.
Recently, the leader of the council visited the offices of the law centre, where he found a poster of a revolutionary nature displaying the words "Support Revolutionary Socialism". That poster

was displayed on the wall of an office in the centre.
Hon. Members will understand that there is natural concern in the borough of Hillingdon that political propaganda of this nature, which of course is acceptable in other circumstances, is to be found in a centre which is kept going at public expense, and that concern is felt very keenly and deeply, especially by my constituents and, I think, those of my hon. Friend the Member for Uxbridge.
Let me refer shortly to the history. After meetings between the leader of the council and representatives of the management committee, from which it was clear that the management committee remained unable or unwilling to control the activities of the staff, the policy committee of the council at its meeting on 3 July considered its future policy towards the law centre. It resolved to discontinue funding with effect from 30 September 1978 and to investigate alternative means of providing a legal advice centre.
On 23 October, there was a further meeting between the chairman of the law centre management committee, a member of the committee representing the Law Society, the leader of the council and the chief executive at which an interim agreement was reached as a basis for the law centre to continue until the end of the current financial year. The basis of the agreement was that the management committee would reconsider and form its own composition and constitution in agreement with the council, the staff of the law centre would not in that capacity indulge in political activities, the management committee would reduce the activities of community workers to the giving of legal advice, which is the purpose for which the centre was established, the new management committee would reconsider its general policy with the approval of the council as a funding agency, and, finally funds should be made available to enable the centre to continue for the remainder of the year, subject to the conditions which have been mentioned.
That agreement was subsequently endorsed by the management committee and the policy committee of the council. As a result of activity by my hon. Friend the Member for Uxbridge and the hon. Member for Hayes and Harlington (Mr. Sandelson), who is out of the country at


the moment, a meeting was convened with no less a person than the Lord Chancellor. The meeting, held in the Lord Chancellor's office, was between representatives of the council and the management committee. There was at that stage every hope of a satisfactory long-term solution being reached. However, it was not to be. On 19 December last year, the management committee approved a revised constitution which flew in the face of the interim agreement which had been reached. It contained no proposals to eliminate the community work which the council finds unacceptable and proposed a composition of the management committee which the council considers will not ensure a committee representative of the community.
The council has now suggested amendments to the constitution to accord with the interim agreement reached and has resolved not to fund the centre after 31 March this year unless the management committee comes forward with acceptable proposals before that date.

Mr. Bruce Douglas-Mann: Does not the hon. and learned Gentleman agree that the proposals now being put to the management committee would deprive the law centre of the opportunity of taking up cases which involve conflict with the council? Where a law centre is operating in any area, it is inevitable, because the council is the major landlord and responsible for the maintenance of the streets and for the enforcement of public health, that the centre must come into conflict with the council from time to time if it is doing its job properly. The structure now proposed by the Hillingdon council would deprive the law centre of the opportunity to fulfil the basic functions of a law centre.

Mr. Crowder: I am glad I gave way to the hon. Gentleman. I have been speaking only this evening to the leader of the council. That is far from being its attitude. The council is anxious that this law centre should work on the basis of the guidelines set out by the Lord Chancellor and should be completely nonpolitical.
At the last meeting, the management committee adopted an uncompromising attitude and gave notice to the staff. The present position is that the law centre

will close on 31 March, taking away from the residents of the borough a useful legal service, only because the intransigent management committee is unwilling to restrict its activity to legal advice and representation. What is the solution? I am glad to see that the Solicitor-General is to reply on behalf of the Government.
I suggest that further discussions should take place on the lines laid down by the Lord Chancellor. I would like to refer particularly to guidelines 3 and 4, namely, that a law centre shall be under the control of a management committee, the majority of whose members should normally represent the interests of the recipients of the law centre's services, and that no local or central Government representatives shall be ex-officios chairmen, vice-chairman or secretary of the committee.
A law centre's primary objective should be to provide a legal service for people living or working within its catchment area. In performing this service, it is entitled to seek out those who are either not aware of their legal remedies and, I stress, Obligations or who may have a fear of law and lawyers. I hope that, as a result of my having raised this matter on the Floor of the House of Commons, this centre will remain in being on the guidelines set out by the Lord Chancellor.

10.35 p.m.

Mr. Michael Shersby: I am very grateful to my hon. and learned Friend the Member for Ruislip—Northwood (Mr. Crowder) for the opportunity to intervene briefly in this debate. He has been able to bring to the attention of the House a matter of great concern to the people of Hillingdon and the Members of Parliament for constituencies in the borough. I am sure that the hon. Member for Hayes and Harlington (Mr. Sandelson) would have taken part in the debate had he been present, but we all know that he is unavoidably detained by his parliamentary duties.
My hon. and learned Friend has set out the position, but perhaps I may add a few details. The Hillingdon council, although it has always supported the provision of a legal service in the borough, is unwilling to fund the so-called educational work which the law centre management committee wishes to undertake


as part of the general law centre activities. Secondly, the council is insisting that the management committee should adhere to the interim agreement reached on 23 October 1978. Unhappily, however, it seems that the management committee is unwilling to confine the work of the law centre to a free legal advice and representation service and is very keen to undertake this so-called educational or community work.
Perhaps I might say something about what that work might be if the law centre were to receive the agreement of the council to go ahead with it. I would draw on the memorandum of evidence by the law centre's working group to the Lord Chancellor and his advisory committee, entitled "Towards Equal Justice". It says:
Another part of the educational work of the law centre is to talk with small and large groups in the area where the centre operates. The members of a tenants' association may wish to know how to enforce their rights in dealing with their landlords, those of a youth club their rights in a police station and those of a local authority social service department a whole host of things.
There is not a word there about the tenants' obligations to their landlords, be they private or municipal. There is not a word about the obligations which a member of a youth club has to uphold the law or to assist the police in their duties. What, in any case, would members of a youth club be doing at a police station such that they would need the advice of the law centre on their rights only and not their obligations?
It is this rather anti-establishment attitude which worries people in Hillingdon and elsewhere. It is one of the aspects of the matter which has rightly led the council to confine its agreement to a legal service being operated in the borough—which is far from being an area of social deprivation. In fact, the law centre is located in Hayes, which is a prosperous area with local industry in close proximity to London airport.
That is the situation in which the council finds itself, and it is determined to discharge what it sees as its responsibilities to the ratepayers of Hillingdon, to spend their money wisely and to ensure that it is legal advice, rather than educational

or community or political advice, that is being given in the area.
I am personally grateful to the Lord Chancellor, as I know are my hon. and learned Friend the Member for Ruislip-Northwood and the hon. Member for Hayes and Harlington. The noble Lord has gone a long way to try to resolve this matter. There is a good chance of resolving it satisfactorily, given good will by the members of the law centre management committee, many of whom are personal friends, and who I know strongly believe that the provision of legal advice is a desirable activity in the area.
We now need a genuine understanding by the management committee of the law centre that there is genuine concern about this work. The committee should accept the council's offer of continued funding at the rate of £45,000 a year, based on the new constitution. That is a considerable prize to those who wish to continue the law centre work in Hillingdon, as I do. I believe that, if the opportunity is grasped now, the law centre will be able to continue. If the opportunity is not taken, there is every chance that the centre will be closed. I hope that will not happen.

10.40 p.m.

The Solicitor-General (Mr. Peter Archer): I am grateful to the hon. and learned Member for Ruislip-Northwood (Mr. Crowder) for raising this subject and to both hon. Members who have taken part in the debate for expressing the hope that there is still time to save the Hillingdon law centre. The House will understand that I am anxious not to say anything which will make that less likely.
When the annals of the law centre movement are written, they will show that Hillingdon law centre featured prominently in the movement's early years. This is not the first time that the centre has attracted public attention. The first occasion was in 1976. The argument then was whether the Law Society should grant a waiver from the solicitors' practice rules. Those rules forbid touting for work by solicitors.
But the point about law centres is that their services must be known to those whom they are intended to benefit. Happily, those difficulties were overcome with the help of the Lord Chancellor, who acted as a mediator, and of a number of solicitors who used their common sense


and powers of persuasion. So completely were they overcome that I am told that in the present dispute the centre has benefited from the goodwill of the Law Society.
I do not believe that the various agencies which offer advice are in competition. The private profession, the law centres and the citizens advice bureaux have a contribution to make. I wish that the resources were so plentiful that the problem was to choose between them. But the need is so vast and the resources so circumscribed that the primary need is to co-ordinate those activities so that each supplements the others. When people are aware of the need to take advice, persuaded that it is worth while, and encouraged to seek that advice, the private profession will also benefit.
Now, the Hillingdon law centre is back in the news. The Hillingdon borough council, which is the centre's funding agent, has expressed concern that, in addition to individual case work, the centre has undertaken what is sometimes known as community work.
Community work is not necessarily wicked. The hon. Member for Uxbridge (Mr. Shersby) gave some examples which do not seem to require discouragement. Community work means offering legal advice to groups within the community or the residents of a locality with a collective problem, preparing leaflets on welfare benefits or employees' rights, or educating groups in various aspects of the law. Sometimes that may extend to offering advice in a campaign for the redress of a grievance.
It would be wrong to approach the matter without a sense of perspective. These activities normally form a small part of a centre's work. The primary role of such a centre is to give advice on individual cases. I understand that in two years this centre has dealt with 3,056 individual cases.
However, I make no secret of my view that a law centre is not simply a substitute for a firm of solicitors. On 25 September 1974 I spoke to the Legal Action Group in London. What I said was subsequently published in the LAG bulletin under the title "Law and the Little Guy."
I ventured to suggest that people with a problem are not interested in theoretical

distinctions between the various methods of redress. A politician might offer legal advice; a lawyer might suggest a press campaign; a law centre might seek to redress a grievance by more than one method. That is proper.
But it is sometimes difficult to decide when activities of this kind have reached the limits of the functions of a law centre. One law centre, in its annual report last year, said:
To provide these people and communities with greater access and greater confidence in using the various professional services and, indeed, self-help procedures available, means inevitably some slight redistribution of power in society. However, organisation to achieve a common goal (whether it be workers joining a union, or tenants fighting for repairs) is clearly a political decision and one in which many of those who fund law centres believe law centres should not be involved. Such involvement becomes more intolerable when the opponent is the local authority.
In addition, and partly as a consequence, the council has now objected to the constitution of the management committee. There have been discussions about this and some willingness to make concessions, but there remains a dispute as to whether the management committee should consist purely of nominated representatives, as the council wishes, or whether some members should be elected.
There is as yet no single accepted constitution for a law centre. Some centres have elected representatives, and some do not. The only conditions which my noble Friend the Lord Chancellor has required are that each centre should he independent of its funding agent and of local government or central Government and the Law Society, that it should enjoy freedom to choose its own areas of work, and that it should be free from interference in the advice given to those who consult it.
This word "freedom" is at the heart of the present disagreement. The council has said, in effect, "We do not like the way that the centre has conducted its affairs in the past and we want it to concentrate on providing advice and representation for residents in the borough to the exclusion of community and educational work." It is clear that the council has lost confidence in the centre, although I hope that is only temporary. In consequence it has threatened to discontinue the centre's grant from the end of


next month unless the management committee is restructured to its satisfaction.
That leaves the centre with a problem, and it has led to renewed arguments by those who believe that law centres should be funded by central Government. The annual report, which I quoted earlier, goes on:
As the community development projects, which were influential in the earlier stages of the Urban Programme discovered, it is dangerous to bite the hand that feeds. Law centres are increasingly convinced that the only long term answer is central funding.
I doubt whether central Government funding is the answer. lf, as I hope, the number of centres is to grow, central Government may not be the most suitable funding agent. Law centres are most effective where they are locally inspired, and, money apart, inspiration is what the centres require most of all. They need inspiration for the staff who work in them—often for long hours on low salaries—and inspiration for members of the management committee who are prepared to give up so much of their time, not only to attend meetings but to keep in touch and offer advice and guidance. I believe that that inspiration arises most readily where the local community accepts responsibility for the centre.
But, in any event, the question of funding law centres is being considered by the Royal Commission on legal services. My noble Friend is keenly awaiting its recommendations. As he indicated last week in another place, until the Commission has reported it would not be right to embark upon any major initiative. He hopes to provide some limited support next year for one or two new projects which are in embryo, but it is quite certain that he will not be in a position to accept responsibility for centres which are presently supported by local authorities. Even if it were possible for one existing centre to be offered central funding at this stage, other local authorities might feel that they would be well advised to withdraw grants and leave the taxpayer to rescue the chestnuts from the fire.
There would be calls in other areas which do not yet have law centres but where the problems are no less intense, such as the metropolitan borough of Sandwell, part of which I represent, for central Government funds.
In fairness, I should add that the Hillingdon borough council has not indicated any intention to withdraw its grant purely on financial grounds. I am grateful for the question that my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) posed to the hon. and learned Member for Ruislip-Northwood and for the assurance that the hon. and learned Gentleman gave in return. It is true that we invite local authorities to provide a rod at their expense which will be used partly on their own backs. That so many of them do so is a tribute to their tolerance and to their regard for the rule of law.
This, then, is the unhappy story. For the second time my noble Friend the Lord Chancellor has entered the story of the Hillingdon law centre as a mediator between the council and the management committee. He has no financial or other responsibility for the centre, but he is concerned, as are some hon. Members who have put their names to early-day motion 188 and others who have put down the amendment, that those whose legal needs are less easily met through citizens advice bureaux or through solicitors in private practice should have access to legal advice and representation.
My noble Friend's involvement culminated, as the hon. and learned Gentleman said, last November in a meeting attended by my hon. Friend the Member for Hayes and Harlington (Mr Sandelson), by the hon. Member for Uxbridge, by the leader of Hillingdon borough council, and by the chairman of the management committee. At that meeting my noble Friend formulated the guidelines which were mentioned by the hon. and learned Gentleman, which he suggested that the respective parties might wish to consider. They were generally welcomed, I thought, by all concerned as a basis for further discussion about the centre's constitution, and especially the composition of the management committee. Unhappily, the discussions have faltered over the question whether all the representatives should be nominated or whether some should be elected.
It is my noble Friend's hope, as it is mine, that the two sides to the dispute will reconsider their respective positions and find common ground to enable the law centres to remain in being. He has indicated to them and to me that he will do


whatever he can in the way of mediation to attain this end, which must, after all, be in the interests of the people of Hillingdon. It is they whose needs are in some danger of being overlooked in what seems to be a battle of principle, and it is they,

Mr Deputy Speaker, whose needs are paramount.

Question put and agreed to.

Adjourned accordingly at nine minutes to Eleven o'clock.